Many Caribbean countries that rely primarily on tourism are undergoing tremendous economic downturns during this time of the COVID-19 pandemic. In most instances it remains the main source of foreign exchange inflows and this is now coming under immense pressure as tourists stay away from the region.
The International Monetary Fund (IMF) has advised those Caribbean countries where tourism is the key economic driver to diversify and look to other industries in an effort to counter financial shocks. One of the major calls here is to place more emphasis on the agricultural sector and to significantly reduce food importation bills. Jamaica, for instance, spends over US$1 billion a year on bringing in foreign foods.
In its latest Regional Economic Outlook, Western Hemisphere report, prepared by Samuel Pienknagura, the IMF wrote:
“Tourism-dependent Caribbean countries will experience more severe recessions because of the sharp and long-lasting decline in tourism. Latin America and the Caribbean’s (LAC) short- and medium-term outlook will be shaped by factors affecting external and domestic demand and how the scars from the pandemic lower potential output. In contrast to the global financial crisis, domestic and external factors this time will move in tandem.”
According to the Caribbean Tourism Organization ( CTO), in the first half of this year tourism arrivals fell off by 50 per cent with visitors from the U.S. to the Caribbean dropping by 60 per cent and those from Europe falling by 55 per cent.
Many ministers of tourism and operators are putting a brave face on it and are looking to be positive but there can be no doubt that the industry in the Caribbean will continue to crater for some time to come as infection numbers are again increasing both in the U.S. and Europe.
The IMF is of the view that the medium outlook points to a protracted recovery, reflecting long-lasting economic costs and most of these countries will not go back to pre-pandemic GDP levels until 2023.
“After falling to -4 per cent in 2020, trading partner growth is expected to recover in 2021. The outlook is less promising for tourism – international travel restrictions and consumers fear of health risks will continue to affect tourism until the pandemic is under control,” writes the IMF.
The multi-lateral agency estimates that real income per capita is expected to remain below pre-COVID-19 levels until 2025, “which means the region faces the prospect of another lost decade as in the 80s”.
Back in April this year, before the first wave of infections and multiple deaths ,the IMF foresaw the halt in tourism would damage many Caribbean economies. It projected the region to contract by 6.2 per cent this year, the deepest recession in more than 50 years.
This means that Caribbean governments must quickly pivot to other revenue sources and keep an eye on their balance of trade.
The second wave and community spread will furthered hamper tourism and the following observation made by the IMF still rings true and will remain for the foreseeable future.
“Key tourism source markets in North America and Europe are crippled by the pandemic. This together with tight border controls and travel restrictions, has led to massive hotel bookings, cancellations and temporary resort closures – putting numerous people in the service out of work.
“Experience from previous crises suggest that the recovery could be delayed. There is also a risk that the ‘fear factor’ associated with the virus could have a long-lasting impact on tourism in the region, even after the pandemic recedes.”
According to Statista, tourism and travel contributes 60 per cent to the Caribbean’s total GDP with the sector’s contribution valued at US$60 billion. The countries where tourism makes the biggest contributions are: Aruba – 74 per cent; Bahamas – 70 per cent; Jamaica – 35 per cent; Barbados – 37 per cent.
Governments will now have to look to alter these numbers and Michael W. Edghill (who has also written in the Yale Journal of International Affairs and Americas Quarterly) writing in the Caribbean Journal back in September 2013 gives some insight as to why.
“Because it (tourism) provides the best possibility for return on investment, the tourism industry is often developed so intently that it leads to a lack of development by the state for other sectors of the economy. This lack of economic diversification leaves the state extremely vulnerable to revenue volatility as has been shown by the global economic slowdown. If people stop purchasing that one good, the consequences are significant.”
There is a pattern continually repeating itself.
As a result of the COVID-19 pandemic, the contribution to the Caribbean’s GDP this year could see losses of up to US$44 billion in a worst-case situation. In a best-case scenario that figure can scale down to a loss of around US$27 billion to the region’s GDP, say some research bodies.
The IMF’s Cyril Rebillard in August of this year, opined: “The precipitous drop in tourism will have an outsized impact on countries that rely on foreign travelers with potentially largescale effects on their economies’ national accounts.”
The IMF is calculating a drop of about 70 per cent in tourism receipts and international tourism arrivals across the world this year