BRIDGETOWN, Barbados – The Barbados-based Caribbean Development Bank (CDB), says the rapid global spread of the novel coronavirus (COVID-19), with significant adverse impact on developed and developing countries is having a significant impact on the Caribbean region.
In its 2019 Annual Report, released here, the CDB, the region’s premier financial institution, said that at the start of 2020, it was projecting regional economic growth, consistent with forecasts of increased global economic activity.
“Since then, there has been the rapid global spread of the novel coronavirus, with significant adverse impact on developed and developing countries. With many countries going into lockdown to contain the spread of the virus and to ease pressure on health services, economic activity collapsed.
“Closure of borders led to a rapid decline in international travel, putting pressure on transport providers, particularly airlines. Governments and central banks announced fiscal and monetary policies in an effort to protect businesses and workers,” the report noted.
It said “the impact on the Caribbean region was significant,” noting that many tourism dependent economies reported mass cancellations.
“Hotels had become virtually empty by March, and cruise ships ceased to operate. Commodity producers were also affected. Guyana made its first delivery of crude oil in January. Since then, a price war between Saudi Arabia and Russia caused prices to decline below the breakeven price in Guyana’s oilfield. “ExxonMobil announced suspension of construction of its headquarters at Ogle, and exploration and production budgets of other operators were cut. Trinidad and Tobago, which is heavily dependent on oil and gas, is likely to experience economic contraction,” the CDB said.
It said that the duration of the impact is difficult to predict; but foreign exchange earnings, income, employment, public sector indebtedness, and government revenues and expenditures are likely to be severely affected.
“Tourism recovery will depend on the extent to which the outbreak is contained in major source markets -Canada, European Union, United Kingdom (UK), and United States of America (US)- how quickly economic activity recovers, and renewed confidence in the safety and security of these markets.”
In the meantime, the CDB said that its borrowing member countries (BMC) have taken action to minimise the adverse impact by boosting social protection for those that have lost their jobs.
“They also eased credit conditions and provided tax breaks to businesses and individuals. These measures to mitigate the impacts must be balanced against the availability of buffers, especially foreign reserves.”
The CDB said that in the medium term, BMCs need to return to the theme of building resilience.
It said disaster preparedness and healthcare systems will need to be fortified, possibly using enhanced digital technology. Parametric insurance and contingent credit facilities should be broadened to cover pandemics.
“In addition, increased emphasis must be placed on promoting private sector development and new sources to earn foreign exchange by, for example, diversifying the economic base and strengthening the regulatory and institutional framework”: the CDB noted.
The CDB noted that last year, consistent with the global slowdown, most of its BMCs experienced slower economic expansion than in the previous year. It said regional gross domestic product (GDP) increased by one per cent, following 1.6 per cent growth in 2018.
The bank said that extreme weather affected the region last year, highlighting its vulnerability and the importance of improving resilience.
On September 1, Hurricane Dorian made direct impact on The Bahamas, causing devastation and considerable loss of life in the islands of Grand Bahama and Abaco. Damage and loss was estimated at US$3.2 billion or 25 per cent of GDP.
“The passage of the hurricane dampened output growth, particularly in the last quarter of the year. The economy grew by about 0.9 per cent, mainly due to developments in the tourism sector, which reported the highest-ever recorded visitor arrivals across all categories. Robust pre-hurricane performance and increased airlift from North America accounted for the surge in tourist arrivals in 2019.”
The CDB said that tourism was once again a vital source of jobs and income region-wide. Overnight visitors rose in nearly every country, according to data from the Caribbean Tourism Organization (CTO). In addition to The Bahamas, there was double-digit growth in St. Kitts and Nevis and the Cayman Islands. Tourism also played a big part in the recovery of countries that had been affected by the hurricanes of 2017. Along with reconstruction activity, this helped to drive significant growth in Anguilla, Dominica, and the Virgin Islands (BVI).
Among the region’s commodity-exporting countries, severe droughts affected agricultural output in Belize and Jamaica. Economic growth slowed to a modest 0.3 per cent in Belize, with agriculture and electricity being the areas most affected, although tourism still expanded.
Dry weather conditions, which affected agricultural production as well as weaknesses in mining and quarrying severely constrained economic activity in Jamaica. The 1.2 per cent increase in GDP in the year to September 2019, therefore mainly reflected growth in tourism, manufacturing and finance services,” the CDB noted.