The Caribbean’s road to recovery from the economic effects of COVID-19 could be a long and arduous journey especially for countries whose economies depend on a tourism industry being battered by the damage of the COVID-19 pandemic, says the Financial Fund International (IMF). in his latest “Country Focus” on the Caribbean, released last week.
Now better placed to assess the economic consequences of the pandemic for the different countries of the region, the Fund says that countries heavily dependent on tourism are now at risk of becoming COVID-19 “long-haulers” as far as economic recovery in question.
“Much like some patients who may suffer from chronic illnesses long after the coronary virus infection has passed, the economic collapse of the pandemic in the region can be felt long after the health crisis has been managed,” said the financial institution in Washington in his recent “Country Focus. “The reason for this, he said, has to do with the fact that most of the region’s countries rely on tourism to generate income and provide employment.
The ‘numbers’ as far as the impact of the pandemic on the region are concerned tell their own story, the Fund said. The pandemic has seen hotel stays fall by 70 percent and cruise ship travel “completely halted,” shrinking the economies of tourism dependent countries by 9.8 percent last year. However, it claims that exporters of goods in the region, particularly Guyana, Suriname, and Trinidad and Tobago, are “less affected” and saw what it described as a “gentle 0.2 percent decline.”
The IMF says that while the majority of the region’s countries were initially successful in containing the spread of the virus and even reopening to international travelers in the second half of 2020, new wave of infections and travel restrictions, especially from Canada, the UK , and the USA, have “checked a much-awaited tourism rebound.” It says that the tourism industry could be choked with “significant long-term scarring,” manifested by job losses that mainly affect young people, women and less-educated workers. These circumstances, he adds, are likely to increase poverty and inequality and prevent the closure and bankruptcy of key employment providers including “hotels, resorts, and related tourism services, such as restaurants, shops and tour operators.”
The IMF’s assessment also points to the likelihood of reduced flights to and within the region, as airlines struggle to regain lost global market share. On top of these challenges, says the Fund, the region also faces “the current risk of natural disasters. ”
Spending on treatment, testing, contact tracking, and vaccine access is likely to be challenging for the region in circumstances where protection of lives and livelihoods remains a priority and must be pursued in order to “limit the economic scarring. “
Worryingly, the Fund notes that “coverage is still low” in the region given the “logistical challenges and lack of economies of scale at the national level in many cases.” Accordingly, it advocates strong regional cooperation as the “key to efficient vaccine distribution.”
In the meantime, the Fund recommends continued financial support for the region, including measures to protect financial stability until recovery has taken root.
And in order to create space for such support and to rebuild buffers, the IMF is urging Caribbean governments to accelerate progress on strengthening fiscal policy frameworks. He says extending the G20 Debt Service Prevention Initiative until June 2021 “provides some relief for countries with high borrowing needs and debt sustainability concerns.”
The Report also states that securing additional IMF financial support at an early stage could help smooth transition by “bridging funding gaps in the near term; catalyze additional international resources; provide a macroeconomic stability anchor; and supporting deeper reforms that deliver sustainable and inclusive growth. “