WASHINGTON, United States (CMC) — A new report by the Inter-American Development Bank (IDB) is urging Caribbean countries to adopt more aggressive fiscal actions to protect their productive assets and invest in ways that ensure more sustainable growth in the future.
“While fiscal space is a constraint, as a nascent economic recovery emerges, additional resources should be channelled to high-productivity infrastructure products to further stimulate growth,” according to the report titled: “A Pandemic Surge and Evolving Policy Responses”. It was released on Tuesday.
The Washington-based IDB said the report is part of its quarterly bulletin series put together by the economics team of its Caribbean Department.
The report includes detailed analysis for Guyana, Jamaica, Barbados, The Bahamas, Suriname and Trinidad and Tobago.
The IDB said the report comes at a time when the coronavirus disease (COVID-19) cases are rising worldwide and, in most Caribbean countries, negatively impacting the tourism industry, just as it enters its peak season.
“First and foremost, countries need to stop the coronavirus from spreading,” said David Rosenblatt, regional country economist for the Caribbean at the IDB, noting that the number of virus cases was rising everywhere, with the exception of Barbados.
“Countries will need to use sophisticated tools that look at closure or reopening of their economies, with decisions based on susceptible, infected and recovered models, both at source and destination countries,” he said.
Looking ahead, the report states that Caribbean economies face “a challenging peak tourist season”, with double digit contractions, plus commodity shocks on non-tourist economies of Trinidad and Tobago and Guyana, “though Suriname and Guyana will see a boost from high prices for gold”.
According to the report, early tourism booking data suggest sharp declines for Jamaica, The Bahamas and Barbados.
The report notes that regional governments have drawn on existing programmes to ramp up social assistance, as well as created new instruments to address the crisis.
“A well-designed public investment program can help stimulate a lasting economic recovery, and several governments are already considering the options,” said Henry Mooney, the research economics advisor for the Caribbean Department.
“Fiscal space will remain an important constraint, but, as a nascent economic recovery emerges, additional resources could be channelled to productivity-boosting infrastructure projects to further stimulate near term growth and long-term development,” he added.
The report notes that better roads or airports facilitate the transport of goods and services to market, and that “improved water and power infrastructure enables industries to operate at lower costs and improves an economy’s productive capacity”.
“Over time, this drives higher levels of private investment, incomes and consumption. Importantly, both economic theory and empirical evidence suggest that countries with relatively less public capital, or where the stock of capital is in need of improvement, stand to benefit most,” the report noted.