By: Staff Writer
June 27, 2023
The Inter-American Development Bank (IADB) in its Caribbean Economics Quarterly Bulletin said that the Caribbean may be doomed to a pre-pandemic low-growth model if it does not embrace innovations as a policy directive moving forward for the private sector.
The IADB said that economic growth in the Caribbean from the turn of the century until the start of the COVID-19 pandemic (2000–2019) was relatively slow, especially in tourism-oriented economies, whose growth rates averaged about one percent or less.
The Bulletin ultimately said: “As countries move towards a new post-pandemic normal, governments should consider educating firms on the benefits of pursuing process innovations and put in place legislation to support them. For example, e-commerce and e-payments are two process innovations that mitigate fallout from diminished consumer demand as consumers gravitate towards digital interactions.”
This low-growth pattern, however, was observed previously by the IADB and the World Bank, with the former previously warning that the Caribbean had already started on its low-growth trajectory immediately post-pandemic because some of the reforms necessary to speed up growth had not been implemented.
The Bulletin also said: “Increasing productivity, in broad terms, means getting more output or higher value output out of the same quantity of the factors of production. Productivity starts with technical efficiency – that is, combining inputs in a way that produces the most output. Technological change through innovation in new processes, new products or new machinery can expand production possibilities, even with the same quantity of inputs.”
Notably, while most Caribbean countries have implemented some variation of fiscal consolidation, this within itself does not solve private sector dynamism and innovation.
Particularly coming out of the COVID-19 pandemic, the previous low-growth pattern is more evident as the region grapples with massive losses to firms that have lost market position in addition to an oncoming crisis in the medium term where many of its young citizens lost valuable training time due to schools being closed.
The Bulletin added: “The COVID-19 pandemic had an unprecedented and devastating impact on the Caribbean, and particularly on firms in the region. The pandemic affected firm productivity through several channels, including by disrupting supply and logistics chains and forcing many firms to rapidly adopt new business processes such as teleworking arrangements. Despite its impact, there has been no empirical research on the impact of COVID-19 and firm productivity and innovation in the Caribbean. Additionally, considering the growing push towards environmental sustainability leading up to the pandemic, and the abrupt transition to strategies such as teleworking in order to maintain business continuity during the pandemic, the authors aimed to bridge that gap in knowledge.
The impact of the COVID-19 pandemic was mixed, however. “The pandemic had no impact on product innovation, but decreased the likelihood of process innovation. Additionally, the pandemic diminished the impact of infrastructure as a factor in process innovation. For firms that believed that there would be a return to ‘business as usual,’ infrastructure quality was less likely to impede process innovation, but financing as a factor in process innovation was unaffected.”