by Marlon Madden
Officials of the International Monetary Fund (IMF) are warning that most Caribbean economies, especially those relying heavily on tourism, could suffer from significant long-term scarring as a result of the COVID-19 pandemic.
They have warned that urgent steps were therefore needed towards diversification of the tourism sector and engagement in sustainable use of ocean resources by increasing investment in shipping, fisheries and aquaculture.
This was outlined in a document prepared this month by Krishna Srinivasan, IMF Deputy Director in the Western Hemisphere; Sónia Muñoz, Division Chief of the Caribbean Division; and Ding Dong, IMF Deputy Division Chief of the Western Hemisphere in their March IMF country focus.
They have also outlined that despite significant funding from the international community, the region was facing a financing gap of about US$4 billion at present, as they warned that the risk of natural disasters could widen that gap in coming months.
“Many Caribbean countries risk becoming COVID-19 economic long-haulers. Much the same as some patients could suffer from lingering illnesses long after the coronavirus infection has passed, the pandemic’s economic fallout might be felt in the region long after the health emergency is controlled,” the document said.
“The reason is that most of its countries rely heavily on tourism. Due to their small size and limited room for manoeuvre, Caribbean economies were among the most affected by the pandemic.
With annual hotel stay plummeting by 70 per cent and cruise ship travel completely halted, tourism-dependent countries contracted by 9.8 per cent in 2020.
Commodity exporters in the region (Trinidad and Tobago, Suriname and Guyana) were less affected and saw mild contraction of 0.2 per cent,” it pointed out.
They pointed out that given the stagnation of the tourism sector as a result of renewed waves of the COVID-19 virus in key source markets “this could lead to significant long-term scarring – loss of jobs hitting mostly youth, women and less educated workers; increases in poverty and inequality; potential closings and bankruptcies of hotels,
resorts and associated tourism services”.
The IMF officials also warned that as airlines struggle to recover Caribbean economies should expect fewer flights to and within the region, and loss of global market share if cruise operators permanently reroute some ships to other destinations.
They warned that protecting lives and livelihoods should remain priority over the short- to medium-term, adding that spending on treatment, testing, contact tracing, and vaccine access was imperative to limit the economic scarring.
“Many Caribbean nations have joined the COVAX initiative and have made bilateral agreements to obtain additional vaccines, although coverage is still low.
“Given the logistical challenge and the lack of economies of scale at the national level, strong regional collaboration is key to ensuring efficient vaccine distribution,” the IMF officials said.
They also proposed that economic support should be sustained until the economic recovery was well established.
This, they said, called for accelerated progress on the strengthening of fiscal policy frameworks.
“Securing additional IMF financial support early on could help smooth adjustment by bridging near-term financing gaps, catalyse additional international resources, provide a macroeconomic stability anchor, and support deeper reforms that deliver sustainable and inclusive growth,”
They further warned that once recovery takes place then countries should immediately tackle their debt problems by “engaging in well-calibrated and appropriately balanced revenue and expenditure measures to reduce the primary deficits while minimizing the contractionary impact on growth”.
Countries should also make greater efforts to access concessional financing to help build resilience against future shock, they warned, adding that these efforts should be accompanied by structural reforms to strengthen competitiveness and raise long-term growth.
“At the regional level, the Caribbean Community has launched a Caribbean Economic Recovery and Transformation Plan to develop a financing strategy to support post-pandemic investment needs.
“The IMF is partnering with the broader international community to find innovative solutions to help small developing states to confront these enormous challenges,” they announced.
With most Caribbean economies still likely to depend heavily on tourism post-pandemic, the IMF officials said a shift to eco-sustainable tourism will lower density, higher value-added and greater integration with local suppliers “may allow countries to reduce the potential health risks currently associated with mass travel”.
They said the region could also harness its blue economy potential, and continue to pursue technological innovation to improve efficiency, reduce cross-border transfer costs and facilitate international trade.
“It is also important not to forget that advancing regional integration – an important and long-standing goal to face common challenges – would help Caribbean economies build greater scale and stronger resilience against future shocks,” they added. [email protected]