The increasing incidence of the Coronavirus (COVID-19) in multiple Caribbean nations is expected to have a damaging economic effect on the region according to recently published Inter-American Development Bank (IDB) paper.
The authors of the Caribbean Development Trends paper say that the magnitude of this impact will depend crucially on the spread of the virus, the duration of the outbreak, and the measures that countries in the region and elsewhere undertake to insulate themselves. It also notes that the outcome will vary by the nature of a country’s economy and its dependence on tourism if the global crisis extends into the 2020-21 winter high season for tourism.
The paper, which was written just as Caribbean nations had begun to report a significant increase in the incidence of the disease and its spread locally, comes as the dangers of transmission from the US and Europe, the region’s main tourism markets, is increasing rapidly.
The IDB said that lost productivity from workers falling ill or being asked to stay at home has implications for national output and the costs associated with emergency medical services. IT also noted that enhanced security and public safety measures will likely place additional financial and other burdens on governments. It further noted that a price and demand shock was likely if, as expected, important sectors including tourism, commodities trade, and cross border financial flows are affected.
The IDB said that in the three countries that are members of the its Caribbean Department – The Bahamas, Barbados, and Jamaica – tourism receipts account for between 34 and 48% of total output (GDP) and similarly large shares of overall employment, so the effect may be severe. It also observed that the severe economic shock now occurring in advanced economies, may also trigger a shift in travel preferences. Should the crisis remain acute past September 2020, the IDB warned that they would expect the impact to be considerably more severe.
The report includes some illustrative shock scenarios, reflecting a range of possible impacts on The Bahamas, Barbados, Guyana, Jamaica, Suriname, and Trinidad. These indicate that while incomplete, a long-lived high-impact crisis on tourism-driven output could result in a 75% reduction in tourism arrivals over the last three quarters of 2020 and could reduce GDP relative to the pre-crisis baseline expectations by between 11% to 26% in the case of Bahamas, and by appreciable magnitudes for Barbados and Jamaica.
The IDB observed that as the crisis deepens, the governments of the six countries reviewed are likely to face increased financing needs driven by the direct cost of crisis mitigation, and from falling revenues induced by the economic shock.
Policymakers, it warns, should work towards developing contingencies and identifying low-cost supplemental financing options over the near term, including those available from international financial institutions. A failure to do so could have adverse implications for longer term fiscal and debt sustainability and put at risk the hard-won gains achieved by many countries in the region over recent years, the IDB said.
The report comes against a background of warnings from several Caribbean governments about the implications. Speaking recently and before the Island recorded its first two cases of COVID-19 brought to the island by visitors from the US, Barbados’ Prime Minister, Mia Mottley, said that she expected the economic consequences will be difficult to contain and may affect the positive progress the island has been making with its IMF programme.
In a further indication of how serious COVID-19 could be for Caribbean tourism, St Lucia’s Prime Minister, Allen Chastenet recently said that his government is modelling various scenarios including a potential fall in arrivals of between 50 to 80%.
More generally across the region virtually every Caribbean nation has reported cases of the virus and has imposed increasingly draconian restrictions on inbound and outbound travel, as well internal travel, work and social gatherings, a situation expected to rapidly become region-wide as transmissions from the US occurs.
At the time of writing the only jurisdictions not having confirmed cases are Anguilla, Belize, Bonaire, the BVI, Dominica, Grenada, St Kitts and Nevis, Turks and Caicos, and perhaps surprisingly Haiti which has closed its border with the Dominican Republic.
In addition, Puerto Rico has declared a state of emergency, imposed a curfew from 9pm to 5am and has closed all non-essential businesses and most government offices. Venezuela has declared a national quarantine, requiring businesses to stay shut and people to stay home in most of the country. Some adjoining territories have closed all or part of their borders fearing that the country’s weakened medical system and continuing outflow of economic refugees, poses a significant threat to regional transmission.