As Barbados intensifies its COVID-19 vaccination programme, two economists from the Inter-American Development Bank (IDB) strongly suggest that the region’s economic recovery will depend heavily on countries’ ability to test their populations and providing access to vaccines, particularly for frontline workers.
In the IDB’s latest Quarterly Bulletin, economists Henry Mooney and David Rosenblatt examine the topic: How Rapidly Can Caribbean Economies Recover?
Noting the importance of access to vaccines for workers in tourism and tourism-related activities, they cautioned availability of timely COVID-19 testing was also key to returning the countries to some level of normalcy.
“Given these and many other complex factors affecting the recovery, considerable uncertainty remains,” they added. According to Mooney and Rosenblatt per capita income recovery was a good measure of return to positive economic place.
“While other measures are important, few indicators are better able to capture the impact of the shock
Based on the latest available data and projections, only Guyana saw positive real per capita GDP growth in 2020 relative to 2019, owing to the start of production at its considerable oil discoveries.”
All other countries, including Barbados, for which data was available, registered declines in per capita income.The IDB officials were especially concerned about the COVID-19 pandemic’s implications for public debt, as countries’ debt-to-GDP ratios climbed dramatically.
In the case of Barbados, the multilateral financial institution pointed out: “The increase in the debt ratio is mainly driven by the contraction in GDP, which was responsible for 78 per cent of the increase in the pre- COVID debt ratio. . . .
The pandemic conditions have resulted in the government meeting rising financing needs with a combination of external borrowing (from international financial institutions) and the issuance of a 2021 domestic bond, known as the Barbados Optional Savings Scheme (BOSS) scheme.”
Barbados was among those countries registering double digit increases in their debt positions. Looking forward, the IDB noted that a key question which remained was whether the pandemic will have a lasting impact on public balance sheets.
And on this score, the institution said, “uncertainty remains”. Barbados is among those countries expected to register an improvement in the debt situation, but for many other regional neighbours, the debt positions are expected to worsen.
On the question of the Caribbean vital financial sector the IDB pointed out: “The shock to most sectors of Caribbean economies has been considerable, which has translated into stresses affecting financial systems and markets.”
On the flip side, the institution stressed that for the most part, financial systems in Caribbean nations were well capitalized entering the crisis, but non-performing loans had increased to double digit shares of the total loans in several countries.
Return on assets and return on equity in the financial sector fell. And in response, regional central banks have lowered reserve requirements for deposit taking institutions, among other measures. (IMC1)