By: Staff Writer
August 31, 2021
The Inter-American Development Bank (IDB) warns that countries in the Caribbean won’t return to pre-crisis economic levels until “at least 2022.”
The IDB in their “Caribbean Quarterly Bulletin: Volume 10, Issue 2” released last week said that due to the lingering effects of the COVID-19 that on the macroeconomic side: “Countries in the region certainly cannot be expected to recover to pre-crisis levels until at least 2022, with the notable exception of Guyana, which is experiencing an oil boom.”
Guyana right now is on an economic tear and seems to be immune from the economic impact and fallout of the COVID-19 pandemic.
Having already earned US$267m from the sale of oil and royalty payments through 2020 and March 2021, Guyana’s balance at the end of this year could reach over US$500m.
Revenue aside, driven mainly by a projected increase of 46.7 per cent in oil production, from 74,300 barrels per day in 2020 to 109,000 in 2021, Guyana’s Gross Domestic Product (GDP) is estimated to grow by 20.9 per cent this year, according to the IDB in their May bulletin.
The August bulletin also said: “The analysis also considers the projected evolution of other macro variables. Of particular significance is increasing debt-to-GDP ratios driven by the sharp recession in 2020, although several countries (most notably Jamaica) are projected to resume or begin aggressive debt consolidation efforts over the medium term. Much will of course depend on how external and domestic demand conditions develop over the near term.”
There are ‘underlying vulnerabilities” to the financial sector the IDB notes that while there are specific risks for each country and “While stability indicators remain for the most part relatively solid, forbearance and related measures undertaken across the region—such as creditors working with clients to prevent delinquencies and defaults—may be masking underlying vulnerabilities. Such measures, as well as other efforts by central banks and governments, have certainly helped to dampen what might otherwise have been a more significant shock to financial systems and economies more broadly.”
It added: “In general, regional economies are embarking on a fragile path to recovery. Continued progress with vaccination programs, credible medium-term fiscal programs, and continued attention to financial vulnerabilities will be needed to push that path to recovery forward.”
In dealing with the COVID-19 pandemic itself across the region, the IDB notes that the region continues to suffer from harsh outbreaks even though containment measures having been put in place. Several countries have seen a considerable rise in cases within the last month even though having low per-capita deaths compared to Latin American countries.
The bulletin also said, however, “Ultimately, the periodic outbreaks will only end when vaccination rates cover a substantial majority of the population. Fortunately, the main vaccines on the market appear to be functioning well against the new emerging and more contagious variants. Even though vaccinated people in rare cases are still getting infected, their rate of hospitalization or death has been extremely low. The larger risk is that these variants will spread among the unvaccinated population.”
Vaccines have been hard to come by for the Caribbean with India being the first out of the gate with supplying the region with over 500,000 vaccines. This was not enough as it appears and issues over the efficacy of the Indian made AstraZeneca vaccine played heavily in the vaccine-hesitancy, especially when it was understood that the Indian made AstraZeneca would not be accepted as a suitable vaccine by the European Union due to the possibility of clotting of the blood in some people.
The IDB warned that the recovery of the economies of most Caribbean countries will depend on the rate of vaccination, particularly due to the dependency on tourism for most countries in the region. With economic output dropping by two digits across the region due to the loss of tourism revenue, this is understood.
The report also said: “With respect to the tourism sector specifically, normalization will also depend crucially on the availability of vaccines for the local population—particularly people working in the tourism sector (e.g., hotels, restaurants, transportation, etc.).
“Similarly, the availability of tests required in some cases for visitors to return to their home countries will also be crucial to ensure that once borders reopen, tourism offerings will remain desirable compared to other possible destinations across the world. Given these and many other complex factors affecting the recovery, considerable uncertainty remains.”
“Against this backdrop, a recent survey of experts by the United Nations World Tourism Organization (UNWTO 2021) found that only 1 percent of industry experts believed that global tourism flows would recover to 2019 levels by the end of 2021. Among this same group of experts, 15 percent thought it likely that flows would return to normal by end-2022, and about an even split—43 percent and 41 percent, respectively—believed tourism would only return to normal by 2023 or 2024 or later,” with some having the rebound as far down as 2026.