The current Coronavirus outbreak has generated a wealth of doomsday headlines and, as the world hovers at the precipice of a global recession, Caribbean economies face a dark future. There are bright spots, however, as tough times foster a spirit of regional cooperation, innovation and resilience. Here, STAR Businessweek presents a balanced view of what likely lies ahead for small island nations and how the region can expect to be transformed by the present crisis.
(1) Lean times for the biggest earner
There is no avoiding the impact of COVID-19 on the Caribbean’s biggest industry – tourism. The World Travel and Tourism Council (WTTC) estimates that 50 million hospitality and travel-related jobs are at risk worldwide and global travel could fall as much as 25 per cent this year. Caribbean countries are already feeling the pinch as major markets such as the US, Canada and Europe implement travel bans and cruise ship companies cease or severely curtail their routes.
There will be no quick fix or easy answer to the impact on tourism in the region, which will continue to be felt even after the crisis has passed as travellers tighten their belts. However, it is worth noting that tourism is an evergreen industry and has continued to sustain the Caribbean through hurricanes, the Zika scare and the 2008 financial crash. In the meantime, the Saint Lucia Tourism Authority is already taking steps to prepare for recovery and met recently with the Saint Lucia Hospitality and Tourism Association to discuss plans going forward.
“This is part of our national strategy to make informed decisions to ensure the ultimate rebounding of the tourism industry,” said Minister of Tourism Dominic Fedee. “Considerations are already being undertaken for the recovery phase as we must ensure that Saint Lucia is positioned to regain its market share when the travel landscape changes.”
(2) More economic diversification
As one industry wanes, others come to the fore. Islands have always been cognisant of the danger in relying too heavily on a single industry but the message about economic diversification has never been more timely. Thanks to proactive stakeholders nudging the agenda, there has been some progress on this in recent years – a prime example being Saint Lucia’s successful foray into the Business Process Outsourcing market – but this will likely ramp up in the wake of the pandemic as a mixed bag approach offers greater economic protection.
(3) Greater Regional Integration
External shocks lead to greater regional collaboration and the pandemic provides an opportunity for better Caribbean integration. Mobilising the region’s response has already involved a range of cross-country efforts and this will continue in the weeks ahead as no island goes unaffected.
CARICOM and the OECS will be key players in mobilising recovery resources while groups such as Compete Caribbean and the Caribbean Development Bank will be instrumental in supporting the business community and facilitating development funding.
(4) A focus on self-reliance
Caribbean economies must look inwards for growth in the short-term. Whether it is prioritising the agricultural industry to enhance food security or encouraging the manufacturing sector, economies that bolster domestic industry will have a greater degree of economic sustainability and self-reliance.
St Vincent and the Grenadines has been particularly proactive in this area – launching a food security and impact mitigation plan right at the start of the pandemic that aims to strengthen food production from backyard gardening to commercial operations. The country’s Biotechnology Institute has already increased seedling production in preparation. Other islands are following suit.
(5) A shift in international relations
The pandemic sweeping the globe is a multi-national event and will likely have a long-term impact on trade relations, diplomatic efforts and official development assistance.
China, the originator of the virus and one of the worst hit, is already seeing a severe contraction and experts estimate its US$ 14tn economy will shrink by as much as 6 per cent in the first quarter of this year. Given the country’s history of investment in the Caribbean, this will inevitably affect future FDI flows to the region.
(6) Slowing GDP growth
The Monetary Council of the Eastern Caribbean Currency Union estimates that even a best case scenario situation (ie containment of the pandemic by the end of June 2020) will slow GDP growth in the ECCU from an expected 3.3 per cent to 2.1 per cent, and the worst case scenario of a global recession will result in a 1.9 per cent contraction.
(7) Rising unemployment
Substantial job losses in the tourism sector are likely to have a knock-on effect on all aspects of Caribbean life, from crime to social protection. Public schemes such as income support and national insurance will carry the burden in the short-term as the job market recovers and this will have a significant negative impact on the Caribbean’s recent efforts to dampen rising public debt.
(8) Greater uptake of technology
With many now practising ‘social distancing’ to slow the spread of COVID-19, online services are becoming more crucial. Whether it’s employees working from home or off-site, customers shopping and banking online or quarantined patients turning to the internet for news, there will be a bigger burden on Caribbean telecommunications providers to keep systems up and running.
This move to a more online society may also prompt new enterprise as technological tools are in greater demand, leading to future opportunities for savvy tech entrepreneurs.
(9) A new approach to education
As the virus took hold in the region this month, schools, colleges and universities gradually closed their doors in a coordinated containment effort. While the short-term disruption is obviously undesirable, the long-term effect could signal a change in the way educational services are offered.
With more institutions exploring online learning and digital curriculums, customised to the needs of pupils and their families, less reliance on physical infrastructure (costly and often inadequate on many islands) may bring about a more progressive public education system in the future.
(10) More ODA
For Caribbean countries that have struggled to gain some measure of economic independence, a return to high levels of Official Development Assistance will seem like a step backwards. However, development aid will be a crucial lifeline in the region’s recovery, especially given the predicted contraction in FDI inflows.
The Inter-American Development Bank is already standing by with US$ 2bn in resources to help member countries across Latin America and the Caribbean and the OPEC Fund for International Development has set aside a US$ 200mn financial package for long-term loans and private sector grants.
