Caribbean Economy Hit Hard by COVID

By Henry Srebrnik, [Moncton, NB] Times & Transcript

How are various Commonwealth Caribbean island jurisdictions coping with the coronavirus pandemic? Overall, the small states and territories have done relatively well in controlling the spread of COVID-19.

Measures were taken to restrict population mobility through shelter in place measures, curfews, and national or localised economic lockdowns. Ten countries imposed national or localised states of emergency to enforce public compliance with prohibitions against the frequenting of bars, beaches and other recreational places.

All countries temporarily banned religious gatherings and closed their borders for varying durations. They have since maintained public health-related border protocols.

This capacity for control has been facilitated by their isolated geographical location. The most severe impacts of the pandemic on them have been economic, as many of these polities are highly dependent on tourism and remittances through labour migration.

The pandemic has highlighted the limited agency of the island countries, buffeted as they are by developments occurring elsewhere. The result has been higher levels of indebtedness, unemployment and psychological stress, disproportionately affecting vulnerable populations throughout the region.

COVID-19 has further weakened the fragile socio-economic fabric of the Commonwealth Caribbean. Economies have been stifled by lockdowns, and by a global decline in travel and tourism. Their export-oriented economies are heavily dependent on tourism, air and maritime transport, financial services, remittances and commodities, including fossil fuels.

For economies based on oil and gas exports, COVID-19 has dramatically decreased the demand for energy, due to reduced international and domestic travel. Trinidad and Tobago illustrate this trend. An increase in the country’s deficit spending has accompanied the decreased contributions of the energy sector to GDP.

The hard-hit Caribbean tourism sector accounts for 15.5 per cent of GDP and employs approximately 2.4 million people. For countries like Jamaica, recently emerged from International Monetary Fund restructuring programs, COVID-19 has dealt a crushing blow to economic recovery efforts. The US$73 million allocated to the COVID Allocation of Resources for Employees program proved to be insufficient early in the pandemic.

The pandemic revealed the inadequacies of existing social assistance programs in a crisis. It is estimated that existing social assistance programs cover just 11 per cent of the most vulnerable in Antigua and Barbuda, and St. Lucia; approximately 30 per cent in Trinidad and Tobago; 43 and 45 per cent in St. Kitts and Nevis, and Grenada respectively; and 76 per cent in St. Vincent and the Grenadines.

The pandemic has exposed the inadequacies of health care systems in the region. Governments have responded by increasing expenditure on health care in many countries. Antigua and Barbuda, and St. Kitts and Nevis, increased their health care budget by 0.5 per cent of their GDP and local manufacturing of medical equipment and supplies has been bolstered in countries like Trinidad and Tobago.

Given the widespread adverse economic impacts of COVID-19, traditional donors may be less willing and able to enter into development cooperation agreements and to offer assistance to developing countries. Leveraging support from multilateral development agencies is therefore likely to be crucial to the process of restructuring and rebuilding.

Some elements of international cooperation have remained, as with the World Health Organisation’s COVAX facility, enabling developed countries to assist developing countries in obtaining a COVID-19 vaccine.

Despite their limited size and resources, Commonwealth Caribbean states have sought to support business and individuals alike, stimulate economic activity and preserve livelihoods. This offers opportunities to deepen functional cooperation and build resilience.

Policy responses to cushion the impact on the most vulnerable have included measures to boost employment in labour-intensive sectors like construction. Many governments expanded existing programs to meet demands arising from the adverse pandemic effects.

Examples include Antigua’s COVID-19 Government Assistance Food Voucher. As well, St. Vincent and the Grenadines expanded social safety net programs, and St. Kitts and Nevis provided additional support for its poverty alleviation program.

Grenada expanded the government employment programs, while Barbados expanded unemployment benefits to self-employed workers, expanded National Assistance payments and coverage under the National Assistance program. The British Virgin Islands stimulus package included an unemployment fund, business grants, and funds for the National Health Insurance program.

The responses that have been implemented should in future push Commonwealth Caribbean governments to go beyond just facing the pandemic’s immediate impacts.