The recent IMF Report (July 8, 2020) projects global growth at - 4.9 percent in 2020. This is 1.9 percentage points below the April 2020, World Economic Outlook (WEO) forecast. This is attributed to the COVID-19 pandemic that has had a more negative impact on activity in the first half of 2020 than anticipated. The conclusion from the IMF report is ominous: ”recovery is projected to be more gradual than previously forecast. In 2021, global growth is projected at 5.4 percent. Overall, this would leave 2021 GDP some 6½ percentage points lower than in the pre-COVID-19 projections of January 2020. The adverse impact on low-income households is particularly acute, imperiling the significant progress made in reducing extreme poverty in the world since the 1990s.”
There are several common challenges posed by these trends to countries globally but are particularly relevant to the small Caribbean Countries.
Flattening the curve as a basis for stimulating the Economy
Flattening the curve is associated with reducing the spread of the virus. The WHO tracker reveals that even though coronavirus cases are low in the Caribbean relative to its small population size, in several countries the curve has begun to flatten. Yet there is still need for caution. Although the Caribbean Public Health Agency (CARPHA) health experts say social distancing and quarantines are critical, the economic uncertainty that comes with those measures provides a powerful counterweight – particularly in communities where reliance on face-to-face transactions is high and where living and other socio-economic conditions preclude all but the privileged to confirm to safe spaces for physical distancing and opportunities for working and studying from home.
The CARICOM Statistical Unit explains some of the difficulties with establishing trends for the Caribbean due to inaccuracies in country reports including limited information on sex , by hospitalization and number of person tested. It identifies the causes for sharp increases during March-April 2020 in some countries like Jamaica and Trinidad and Tobago with specific events resulting in 700 new cases over 24 days. Yet with the exception of four-five of the 22 CARICOM Community Member and Associate countries experiencing an increasing trend in transmission by May 2020, there has been a relatively low rate of transmission reflected in new cases.
Execution of protocols such as increased randomized testing, closing of borders , applications of contact tracing and quarantine measures have led to optimistic signs that more countries are ready for a phased opening of their economies. There are also positive signs with respect to the education sector by the recent signal from the University of the West Indies that its campuses are being readied for on campus classes and from the new Vice Chancellor of the University of Guyana that that institution is considering a blended learning environment that includes both online and on campus course delivery.
Revamping the approaches to attract Intra Regional Tourism
According to the IMF Report (July 8, 2020) there is a possibility that tourist arrivals could drop by as much as 75% in the last half of 2020. With the sector screeching to a standstill, the repercussions are already enormous, especially given the already high debt-GDP ratio in the region. A compounding factor is that GDP relative to pre-crisis expectations is likely to fall by 10 percentage point for Bahamas, 6.5 % for Barbados and 5.4% for Jamaica. In all three countries tourism contributes between 34-48% of GDP. Because most Caribbean islands have seen relatively few cases of COVID-19, the main concern is keeping infections out which may prove to be an anomaly if not an impossibility with the aim to bring tourists in. During the peak tourism season for example, cruise ship tourists number approximately 20,000 per day. Under these circumstances the largest single untapped source of business for Caribbean tourism is the Caribbean itself. It leaves as a policy option for consideration, the possibility of tapping into tourism from within the region.
The "Syndemic" of COVID 19 and Climate Change
Occurrences of various natural disasters that exacerbate major pandemics is referred to as a “syndemic”. With the hurricane season on the horizon, any natural disaster will only add to the impacts of a pandemic that is already converging with economic recession. The most recent reminder is the disastrous effects which Hurricane Dorian inflicted on the Bahamas included losses that amounted to $3.4 billion, or 27% of GDP. The most comparable are the effects of climate change and COVID-19 in that they both require urgent society wide responses mainly through social cooperation and behavior modification. In the case of COVID - social distance, hand washing and mask wearing. Responses to climate change require managing extreme disasters, protecting coastlines, preventing sea level rise and protecting energy and public infrastructure. Both COVID -19 and Climate Change require placing emphasis on a viable health care system for the public and planet, respectively.
Health essential to Economic Growth
The COVID-19 pandemic has fully demonstrated the importance of health to economic growth. GOFAD will follow up on this policy debate which often focuses on controlling healthcare costs rather than on the bigger picture. A recent Mckinsey Global Institute study Prioritizing health: A prescription for prosperity, shows that the bigger picture shines light on the pandemic and its effects that will cost the global economy up to 8 percent of real GDP in 2020. Yet each year, poor health costs twice as much—around 15 percent of global real GDP from premature deaths and lost productive potential among the working-age population. At the same time, organizations around the world are looking for tools to speed up economic recovery, rethink health as an investment, not just a cost. This is a useful mantra that countries in the Caribbean and elsewhere should consider for accelerating growth for decades to come, even in the face of a pandemic and a 'syndemic'.
Edward and Auriol Greene Directors, GOFAD.