As the unprecedented crisis of the COVID-19 pandemic continues its onslaught on the world, the Inter- American Development Bank (IDB) has said that there will be severe economic implications for some Caribbean countries.
In its recently released quarterly bulletin for April, the report noted member countries such as Barbados, Jamaica, Guyana, Suriname, and Trinidad and Tobago among some of the top countries to be most impacted by the crisis. This as these countries over the last few weeks have had to grapple with significant fallouts in industries such as tourism, trade, and remittances — which are major revenue earners.
“Caribbean economies are among the most tourism-dependent in the world. Tourism accounts for between 11 and 19 per cent of direct output gross domestic product (GDP), and between 34 and 48 per cent of total GDP in The Bahamas, Barbados, and Jamaica. Tourism flows are also responsible for similarly large shares of direct and overall national employment, with all three countries ranking in the top 20 globally on both measures,” the report said.
It further outlined that given the near-complete shutdown of both passenger air travel and cruise ship activity beginning in March 2020, it can be implied that there will be a much larger shock to tourism arrivals and related receipts for 2020. Noting also that while tourism in the other Caribbean countries may play a smaller role in their economies, it is not to be viewed as insignificant.
For the commodity-dependent economies such as Trinidad, Guyana, and Suriname which rely on gas and oil production and gold, the report said that the downward trajectory in oil and gas prices will hurt commodity exporters but may be a relief for those having to import. Noting gold as being highly volatile, it was stressed that there was however a tendency for its price to remain high even amidst financial turbulence.
“The evolution of these commodity prices will have an important impact on the external accounts of the Caribbean countries. Aluminum prices are also on a downward trajectory, which is relevant for Jamaica, as it represents the largest merchandise export,” the report further outlined.
JAMAICA
Regarding Jamaica, the report said that the crisis will have profound implications for economic performance in 2020 and beyond. Prior to the crisis, real GDP growth for FY2020/21 was projected to be about one per cent, set against the backdrop of expected strong domestic conditions and buoyant external demand for tourism and commodities.
“The nature of the unfolding crisis is such that it will likely affect key sectors, particularly tourism, which account for 34 per cent of total economic output and 31 per cent of employment. Jamaica ranks 16th globally in terms of countries’ economic dependence on the sector. In addition, a large proportion of tourism arrivals to Jamaica originate from the United States, Canada, the United Kingdom, and other European countries — all of which have imposed unprecedented travel restrictions. In this context, implications for Jamaica’s most significant economic sector are without historical precedent,” a portion of the report said.
REPORT ASSESSES CRISIS
Simulations presented in the report also suggested that a prolonged crisis could reduce output relative to pre-crisis expectations by an appreciable magnitude, particularly if the crisis persists throughout the end of the year. The recent report aims to provide new data and highlight the potential magnitude of economic shocks to the Caribbean, also exploring various transmission channels thorough which the crisis will impact economies and highlights some of the most important vulnerabilities that policymakers will have to focus on when developing response packages.
It also puts forward recommendations urging governments of the region to take immediate action to contain both the virus and its economic impact via the prudent utilisation of the full spectrum of policy measures available to them.
General manager for the IDB’s Country Department Caribbean Group(CCB) Therese Tuner-Jones says the special edition of the Quarterly Bulletin is another way the IDB is supporting the region in this crisis.
“This pandemic has generated an unprecedented wave of economic shocks for the Caribbean. Our role as the leading multilateral partner is to provide as much support as possible. We are working with governments in the region to respond quickly and deploy all available resources. Our team is also responding with comprehensive analysis of the effect on our economies,” she said.
“In this latest edition of our Caribbean quarterly bulletin we use existing data to explore different shock scenarios for the region as well as specific implications for all of our member countries,” Turner-Jones added.
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