Tourism’s revival could be short-circuited by crisis

Barbados and other regional states are being warned that another global recession could be on the horizon, as oil, food and other commodity prices continue to increase, sanctions are stacked against Russia, and global supply chains experience delays.

At the same time, tourism-dependent destinations are being cautioned not to become complacent, but to expect airfares to rise, which will disrupt the re-emergence of the tourism sector.

Bashir Badawi, Management Consultant at Seladon Petroleum Associates Ltd. and Professor of Practice at the Sir Arthur Lewis Institute of Social and Economic Studies (SALISES), Mona Campus, Ambassador Richard Bernal, warned of these far-reaching impacts of Russia’s invasion of Ukraine on Thursday.

Since then, oil prices have risen to more than US$100 per barrel and experts have warned of further imminent increases as well as a rise in food prices.

“We are watching carefully now how the world performs over these next two quarters to see whether there will be a global recession due to this current crisis,” Badawi said as he spoke at the SALISES Vice-Chancellor Forum on the topic, Of Ukraine Oil.

“The money markets themselves will be affected by what is going on. The lack of investment in the oil industry that has happened since 2014 is starting to show,” added Badawi, while noting that increased production in Saudi Arabia and Abu Dhabi was highly unlikely to fully replace the absence of Russian oil.

“This is all going to lead to increasing oil prices and increasing products. So it is going to be much more expensive to fill your car up with petrol or diesel and then the knock-on effect on transport, of goods and food.”

Badawi warned regional leaders to pay close attention to potential long-term effects on their economies and “look further afield, perhaps, to guarantee their [oil] supply, taking into account the shipping and so forth, on a longer-term”.

He also indicated that business barriers to entry should also be considered when it came to energy and other services coming into the region.

“The other thing is, this is going to increase the cost of imports . . . and this is not just here in the Caribbean but this is a global issue and we are concerned about the inflationary pressure this is causing,” said Badawi.

Meanwhile, Ambassador Bernal said whatever the outcome, however long the conflict lasts, and whatever the resolution, there are several implications for the region, including economic, social, and political which he said have already started in some instances.

He pointed to the increase in oil and natural gas prices, instability in the foreign exchange markets and stock markets, and increases in food prices that he said were inevitable and will take place over the short, medium, and long-term.

Bernal also highlighted an increase in inflation, fiscal stress, and public debt, which have already started to affect countries.

“This will require multilateral initiatives to reverse and handle this situation. International reserves, even where they are adequate, are going to have to be drawn down in the short-run,” he said.

Noting that supply chain disruption was also inevitable, he said it will result in delays and contribute to price increases, while the sanctions on Russia will have far-reaching consequences for the rest of the world.

“Finally, for the Caribbean, airfares and shipping costs are inevitably going to go up and that will affect the nascent recovery of tourism,” Bernal warned.

He said he also expected that there will be “a redirection of international trade based on consideration of political alliances and national security [and] a wholesale reorganisation of production and marketing of oil and gas”.

The good news, he said, was that the war should spur a renewed effort in the Caribbean to promote the green economy and reduce reliance on fossil fuel.

“I want to warn against those people who are dismissing this situation as temporary, short-term, and, above all, something which they can handle. There is going to be need for serious preparation. Anyone counselling complacency is doing all of us a disservice,” warned Bernal.
marlonmmadden@barbadostoday.bb