With many Caribbean economies still performing below par, there are mounting fears among officials about the devastating impact the dreaded COVID-19 could have on the region’s bread and butter tourism industry and related sectors.
This warning was sounded on Monday as the University of the West Indies (UWI) hosted a Vice-Chancellor’s Forum – COVID 19: Partnering in the Caribbean’s Response.
While panellists pointed out that governments and the university were working closely with national and regional institutions to minimize the threat to the region, they agreed that should the virus, which originated in China, reach our shores, it could have devastating consequences.
Director of Economics at the Barbados-based Caribbean Development Bank (CDB) Dr Justin Ram warned that Barbados and other regional states were in no position to deal with a health crisis since they were already in a “tough place” economically, coupled with other developmental challenges including unemployment and a decline in population growth.
“On top of this we are likely to be dealing with a major crisis if it is not contained quickly,” warned Ram.
He told the gathering that after a simulation by the IDB to determine the impact of the virus on at least one economy, it was determined that it could have a far-reaching impact, putting a dent in the tourism industry, negatively affecting wholesale, retail and transportation, fracturing supply chains and reducing productivity.
“If we have a hit on tourism, it is not only the tourism industry that is likely to be impacted. There are also these indirect impacts. So for example, in some of our countries the agriculture sector provides significant inputs to tourism, and if tourism is impacted there is a reduced demand and there will be a knock-on reduced demand for agricultural products and knock-on reduced demand for taxi drivers,” he explained.
He warned there was likely to be a decrease in well-being, an impact on jobs and lower tax yields due to the knock-on effects in a reduction in tourism.
The tourism industry alone directly employs some 2.4 million people, contributing just over US$60 billion or 15.5 per cent to the region’s gross domestic product.
Ram said with the region importing “quite a lot” from other regions including the US, if COVID 19 was to have a greater impact in the United States our supply chains are likely to be impacted.
“Think about what could happen if we can’t import our food from the United States. Do we have the contingencies in place to allow us to get our food from other source markets and how quickly can those contingencies be put in place?” he said.
He also warned that a health crisis in the Caribbean could lead to lower primary balances for governments, higher public debt and low economic growth.
The economist cautioned that putting monetary policies in place would have very little impact and suggested that governments come up with a fiscal response instead.
“There needs to be a fiscal response when it comes to dealing with this particular crisis,” said Ram.
“I think the policy response needs to be on the demand side. We have to think about how we support the economy at this time . . . we have to think about how we support labour markets and how we support the private sector. Governments should sufficiently think about resourcing our hospitals and primary care facilities at this point with the right amount of labour and financial resources,” said Ram.
He also suggested that governments start thinking about providing health insurance to help the less fortunate pay for medical bills associated with the virus.
“Governments should also be encouraged to support and encourage sick paid leave because if you have guaranteed sick paid leave it is going to be easy for you to self-quarantine, and that is going to be critical at this point. It can be an instant stabilizer in the economy because we don’t want a situation where we are saying stay at home and you don’t have an income,” he said.
Ram said private sector firms were likely to suffer liquidity crunches because of falling demand, and therefore governments should be thinking about offering “temporary tax and wage relief as automatic stabilizers”.
“Financial intermediaries might need to become part of the act in the fiscal response, because we need to ask for forbearance to borrowers at this point if things become critical, because it doesn’t make sense for a financial intermediary to be hounding down a lender when they can’t pay. You have to think about the long-term.”
He also pointed to the need for digitization, adding that this would become critical in the need for medical check-ups. Ram said digital technology would also be critical to help people to continue to carry out transactions.
Officials have predicted that global tourism could witness a reduction of between one per cent and three per cent as a result of the COVID-19 disease and the industry could lose between US$30 million and US450 million as a result.
Dr Michelle McLeod, Head of the UWI Centre for Hotel and Tourism Management in the Bahamas, said she was confident adequate steps were being taken in the region to deal with the threat of the virus.
However, she agreed there could be some devastating impact on the tourism industry.
“In terms of the impact on employment in particular, if you are looking at the cruise ship industry we have a number of small micro and small enterprises – store vendors, taxi operators and attractions that are all part of that cruise industry – we have to be particularly concerned as to what measures can be put in place. The impact on employment of these very important operators would not be as great,” said McLeod.