Weeks of COVID-19 induced shutdowns and travel restrictions in most Caribbean countries appear to have yielded results. As the English-speaking Caribbean’s rate of new cases slows, several regional governments have cautiously embarked on phased re-openings in the belief that the curve has finally begun to flatten.
This is indeed welcomed news, both from a human and economic standpoint. However, in addition to the human toll, there is no denying that COVID-19 presents an economic shock the likes of which the region has not witnessed in decades. Reduced domestic economic activity, halted tourist arrivals and growing unemployment, as well as the possible economic fall-out in our major trading partners and tourism source markets, are poised to send the region’s economies into a tailspin.
Biggest Contraction Economic Activity in History
New growth projections released this week by the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) warn that the COVID-19 pandemic will lead to the ‘biggest contraction in economic activity’ in the Latin America and Caribbean region’s history.
In her press conference, the organisation’s Executive Secretary, Alicia Barcena stated categorically that borrowing is not an option for Caribbean countries, many of which already have unsustainable debt levels and will need access to concessional financing and debt relief.
As it currently stands, many Caribbean countries have been graduated from accessing many forms of concessional financing merely on the basis of being ranked by the World Bank as ‘middle income’ or ‘high income’ economies, without regard to the many inherent vulnerabilities they face.
Barbados PM’s Renewed Call for a Vulnerability Index
On this latter point, Barbados’ Prime Minister the Hon. Mia Amor Mottley’s renewed call for a vulnerability index instead of the current income per capita method for determining countries’ eligibility for concessional financing is timely. Her remarks were made during an eleven-minute interview with CNN International’s legendary journalist Christiane Amanpour in which she discussed the human and economic impact of COVID-19 on Barbados and the wider Caribbean Community (CARICOM), of which she is currently the Chairman.
In the must-see interview, Prime Minister Mottley both praised and called for a revisiting of work conducted by The Commonwealth Secretariat on a Vulnerability Index over thirty years ago. On this note, the Shridath Ramphal Centre of The University of the West Indies (UWI) Cave Hill Campus has already begun conceptual work on a Trade Vulnerability Index.
Caribbean Countries’ Economic Responses
Within the limited fiscal space available, several Caribbean countries have announced stimulus packages whose social component aims at assisting the most vulnerable in their societies and supporting Small and Medium-sized Enterprises (SMEs) which have been among the most affected by the economic fall-out.
Barbados, which will enter Phase 2 of its lockdown exit strategy from May 4, has not only announced a BDS$20 million stimulus package but has also established a Jobs and Investment Advisory Council to help the island navigate the current headwinds.
The COVID-19 pandemic could not come at a worse time for Barbados which since October 2018 has been implementing an economic recovery and transformation programme supported by the International Monetary Fund (IMF)’s Extended Fund Facility. This week, a staff-level agreement was reached on the third review of the programme. In its first quarter economic review, the Central Bank of Barbados also this week forecasted a double-digit contraction in the Barbados economy this year due to the pandemic.
COVID-19 lessons and legacies?
From the start of the pandemic, the Caribbean’s leading tertiary institution, The UWI, has shown exemplary thought-leadership on this crisis through its research support to governments and general outreach activities.
In an intellectually stimulating presentation during a conference entitled ‘COVID-19: Approaching Code Red’ hosted by The UWI’s Mona Campus, Ambassador Dr. Richard Bernal acknowledged the serious economic challenges posed by COVID-19, but also outlined some of the possible positive outcomes, such as the greater reliance on technology, more stringent health precautions taken by the airline industry, and the likelihood that the region’s tourism industry might rebound quickly as North Americans may prefer to travel closer to home.
Like the Global Financial Crisis of 2008 whose economic impact it is predicted to surpass, the COVID-19 pandemic is leaving us with many lessons and legacies that will be debated by academics and policy makers for years to come. What is not debatable, however, is that this pandemic has further reinforced the vulnerability of many small States whose narrow export base and import dependence increase their susceptibility to external shocks such as this. As Prime Minister Mottley and many others before her have argued, there must be a rethink by the international community of eligibility for concessional financing.
But the Caribbean must also take responsibility for its own fate. For starters, reliance on a single industry – in most cases tourism – for economic activity and employment has never been and will never be a sustainable economic path. Greater economic diversification, particularly into value added industries, is a must, as well as creating a facilitative environment for business, sustainable foreign direct investment (FDI) and entrepreneurship.
The region’s high reliance on the importation of medical products and food remains unsustainable. Industrial and innovation policies are an imperative, and there is the need to, where possible, build manufacturing capacity for products which would be needed during a pandemic. On this score, it is commendable that several regional rum and spirit manufacturers have begun manufacturing rubbing and surgical alcohol and hand sanitisers to address regional supply shortages. The Bahamas has sought to reduce its dependence on imported masks by banning their importation and developing its own mask manufacturing industry. Regarding food security, CARICOM agricultural ministers met virtually on April 20 to discuss plans for boosting the region’s food production.
The sometimes awkward shift from the face to face to online provision of services during the shutdowns reveals that the region’s governments and private sector still have far to go to fully take advantage of the digital age. Let us hope that even when the COVID-19 pandemic has been ‘conquered’ by a proven vaccine, Caribbean governments and businesses will continue to prioritise the embrace of technology.
Additionally, it should not be forgotten that members of the Caribbean diaspora are among those who have tragically lost their lives to COVID-19, particularly in New York. Many of these persons would also have been supporting loved ones back in the region through remittances. That said, however, the diaspora can and has been a powerful resource, including by making donations of supplies and expertise.
On a final note, I wish to extend my condolences to all families across the region and beyond who are mourning loved ones lost to this dreaded virus. I also join with many others in extending heartfelt kudos to all the essential workers who daily put their lives on the line to ensure we still have some measure of ‘normalcy’ in these abnormal times.
DISCLAIMER: All views expressed herein are her personal views and do not necessarily reflect the views of any institution or entity with which she may be affiliated from time to time.