Warning for tourism-dependent countries

The Director of the Western Hemisphere Department at the International Monetary Fund (IMF), Nigel Chalk, says the Washington is “very concerned that tourism-dependent Caribbean economies are likely to be the hardest hit” as a result of the ongoing conflict in the Middle East that has so far resulted in high oil prices.

“Their debt is high, their fiscal space is small, and they’re quite large net energy importers, despite investments that have been made in these countries in shifting towards renewables.

“We also don’t know what the potential impact of this war and the shifts in energy prices may have on flights and on tourism.  And so, that’s another thing that we’re keeping an eye on,” said Chalk.

Last Friday, the IMF said that Caribbean Community (CARICOM) countries will register mix economic growth over the next two years, ranging from 3.1 per cent among the tourism dependent countries of the region to 19.1 per cent among the region’s commodity exporters.

The IMF said that the region overall will register average growth of 5.7 and 8.6 per cent for the years 2026 and 2027, Caribbean tourism dependent countries will register growth of 0.9 and 2.5 per cent over the next two years.

The non-dependent tourism countries will have growth of 7.9 and 11. 3 per cent over the 2026 and 2027 period, according to the IMF projections.

Among the tourism dependent countries of the Caribbean,  Jamaica is expected to  register minus 1.2 per cent growth this year, increasing to 3.1 per  cent in 2027, the same as Grenada, which is expected to register the same percentage this year.

Antigua and Barbuda will record growth of  2.6 and 2.4 per cent over the next two years, while The Bahamas will  register growth of  2.1 per cent this year, declining to 1.9 per cent in 2027, while  Barbados growth will be 2.5 and 2.2 per cent .

Belize will register economic growth of 2.2 per cent this year, decreasing slightly to 2.1 per cent in 2027, while  Dominica’s growth of 3.1 per cent this year, will decline slightly to  2.8 the following year.

The twin island Federation of  St. Kitts and Nevis will register growth of  two per cent this year, increasing slight to 2.5 per cent the following year, while St. Lucia’s two per cent growth will  decline to 1.7 per cent next year.

St.  Vincent and the Grenadines will also register a decline in economic growth of 2.7 per cent in 2027, down from the three per cent this year.

Chalk said he believes several countries in the Caribbean have already started taking decisions to  cushion the impact of the increased oil prices.

“I think several countries in the Caribbean already have mechanisms in place that smooth energy price increases so that not all of that energy price increase is passed through immediately,” he said, adding “that can buy a little bit of time in terms of how that feeds into the economy.

“But what we don’t want is for countries to permanently increase subsidies to energy.  Those subsidies are untargeted; they benefit the rich more than they benefit the poor.  And in the current environment, you can start that process, maybe with oil prices atUS$90, but you don’t know what oil prices will be three months from now.

“So, the size of the subsidies you may be creating over time could be quite large and quite unpredictable. So, we think trying to let the market mechanism work, that will allow individuals and firms to make decisions to reduce their demand for energy, and that in turn will put less pressure on the economy as we let the market system work.”

Chalk said that in terms of the migration to the US, the IMF does not see a downturn in the region.

“ We actually feel this region is quite aside, particularly aside from the Caribbean.  But the region more broadly is quite well placed with decent fundamentals and some space, some fiscal space.  So, we don’t see an economic downturn in our forecasts.

“We don’t think that’s going to precipitate a large migration wave.  There are important issues related to migration for particular countries.  We can think of Venezuela and Haiti, but I don’t think that sort of a sudden push of migration flowing northwards seems likely at this point,” he added. (CMC)

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