Every economy in the world will feel the effects of Covid-19, but the pain will be especially acute in the Caribbean region, where the bottom has fallen out of the tourism market. Now is the time for governments to think big about how to make the region more resilient, one economist says.
“Although we’re now into a short-term crisis, our focus has to be on the long term,” said Justin Ram, Director of Economics at the Caribbean Development Bank, speaking at a recent webinar organized by New Energy Events. The question for the Caribbean, as Ram put it: “How do we now invest for the future in a way that reduces our overall vulnerabilities?”
The region’s mantra, he said, must be “resilience, resilience, resilience.” That means, among other things, investing in renewable energy, which will provide more predictable and competitive prices. It means implementing innovation and structural changes that will make the region’s economies more efficient and productive, Ram said. It means making improvements to the education system so that young people are better prepared to enter a new workforce.
None of that will happen overnight, of course. In the Caribbean—as in much of the world—normal daily life is on hold for the moment, as people hunker down at home. The temporary shutdowns are the “absolute right response” to safeguard people’s health, but they will carry a price, according to Ram.
“What we’re having here is unfortunately a natural tradeoff for the preservation of life,” he said, “and that means that we’re going to go into some type of contraction.”
A decline in GDP growth rates will have “a real knock-down impact on government revenues,” which will likely lead to ballooning deficits and higher debt-to-GDP ratios, Ram said. And as governments seek to spend more to stimulate their economies, he cautioned, they must ensure that they don’t deplete their foreign exchange reserves and make the economic situation worse.
Despite the short-term pain, Ram and other panelists said they were already getting positive glimpses of a more competitive future in the Caribbean. For example, during the shutdown, banks, grocery stores, gyms, and even governments have started to provide more services online. And many companies are finding ways for their employees to work productively from home.
Unlike a hurricane, the Covid-19 crisis is hitting the entire Caribbean region at once, which provides an opportunity to think about some of these issues more regionally and use the moment to “leapfrog” to stronger, more diversified economies, according to Racquel Moses, CEO of the Caribbean Climate-Smart Accelerator.
In a subsequent interview, Moses said the region will no doubt need an influx of concessionary finance to recover from this crisis, and it will be important to make renewable energy and digital transformation a central part of rebuilding economies.
“We really do need to pay attention to the opportunity in this moment,” she said.
April 9, 2020 - How will COVID-19 re-shape the Caribbean? (source: NewsEnergyEvents)