Some Thoughts on Covid-19 and Caribbean Economies - by Shineco Sutherland

Ah, that shiny January 1^st 2020. A day replete with promises, resolutions, new plans and maybe new directions for the more ambitious among us. Then the rest of the year followed. In what followed after, none of us could have predicted the reach of Covid-19 or that we would be housebound, telecommuting like there is no tomorrow and becoming more tech savvy than we thought possible. Fortunately, there has been some good moments between these developments (some of us learnt to bake; cook; reacquainted ourselves with those lovely apartments/homes that were a blur as we sped through our busy pre-Covid-19 routines; spent more time with family). However, I think most of us would gladly trade in 2020 for…anything else at this point. So, if 2020 has been so tumultuous for us on an individual level, how has it affected countries, especially the small island developing states of the Caribbean? Stick around if you want to read my thoughts on what 2020 and the Covid-19 pandemic has highlighted in the region.

The most glaring impact on our region is the abrupt halting of our tourism industry. The “sailors” who would usually regale us with their enviable photos of foreign lands or contribute heavily to the region’s remittances are suddenly at home before the end of their contracts. Additionally, hotels and guest houses that were once bustling at the height of the tourist season are virtual ghost towns. The region’s many festivals and entertainment events were all shuffled into the virtual spheres. These are merely a few examples of how Covid-19 has impacted the region’s tourism product. Beyond the short-term reduction in remittances, corporate income tax or spill-off activities such as tour guiding, what longer-term impacts do we expect from these Covid-19 induced changes? Some are discussed below.

The anticipated growth rates of the tourism sector will fall off drastically, after performing relatively well in the last few years. This translates to negative economic growth in our economies that are tourism dependent (Most CARICOM and OECS countries).  For instance, the Eastern Caribbean Central Bank forecasted in its 2019 annual economic and financial review (before the magnitude of the pandemic was realised) that the economies in the Eastern Caribbean Currency Union would contract by between 10 to 20 percent in 2020. The BarbadosCentral Bank observed a 27 percent contraction in their economy over the period January to June 2020. The Bank of Jamaica estimated between 1.5 and 2.5 percent reduction in their economy as at March, 2020. These slower rates of growth can then translate to rising unemployment, reduced revenues for governments and possibilities of increased indebtedness as governments resort to borrowing their way out of the economic downturn. These outcomes spell trouble for the region that is working its way out of disaster recovery efforts, loss of access to concessional funding as they “migrate to higher development classifications” and are operating within a context of largely undiversified economies.

Another area impacted by Covid-19 is that of logistical networks. As Caribbean countries tried to implement their Covid-19 mitigation strategies, most depended largely on imported products (such as ventilators or personal protective equipment) from or via core trading partners such the US. However, some challenges quickly arose as the US used quantitative restrictions in attempts to support its own national response. The US government subsequently issued a statement that there was no deliberate restriction of access to the products and diplomatic routes were later used to address the snaffu. This, nonetheless, highlights the need for the Caribbean to internalise that new buzzword “nearshoring”. Put simply, it would ensure that strategic products and services (think medication, food or electronics) are located within the region, minimising the extent to which national/regional policies are held hostage by the socio-politics in other countries/regions. This new reality re-emphasises the need for the region to nurture the environment/ecosystems needed to foster diversified and higher-valued products and services to support strategic policies. Such ecosystems can then create spill-off opportunities such as the ability to host outsourced business processes as other regions also pursue nearshoring. Additionally, the logistical challenges highlight the importance of cultivating a true regional movement, since resource challenges faced by most Caribbean countries deny the feasibility of national pursuit of such agendas. If the region successfully pursues nearshoring, it can ultimately create avenues through which countries can diversify their economies, move towards reduced vulnerability to exogenous shocks and enhanced sustainable development efforts.

Covid-19 has largely negatively affected the Caribbean but simultaneously, it has re-emphasised opportunities for the region to re-orient itself unto more sustainable paths.