NASSAU, BAHAMAS — Tourism dependent Caribbean countries like The Bahamas could see anywhere from 12 percent to as much as 20 percent of its tourism-related labour force ‘adversely affected’ by the COVID-19 pandemic, according to the Inter-American Development Bank (IDB).
In its recently released Caribbean Quarterly Bulletin, the bank noted that The Bahamas is among the most tourism dependent country’s in the region, ranking second to Antigua and Barbuda on its tourism dependency index which listed 10 other countries.
The report read: “For Caribbean countries that are most dependent on tourism, such as The Bahamas and St. Lucia, anywhere from 12 percent to as much as 20 percent of the labor force could be adversely affected by the pandemic.”
The IDB noted the simulations used shock scenarios where the COIVD-19 employment shocks were applied to the direct contribution of the tourism industry to employment, not taking into account other sectors such as retail, services and construction “that are likely to be adversely affected by the loss of jobs and purchasing power for those working directly in tourism”.
“Taken together, these and related exercises underscore the human dimensions of this crisis — many individuals and households in the region will suffer, implying severe social costs that are difficult to capture with economic aggregates,” the IDB noted.
The IDB also noted expectations remain uncertain with the tourism sector being effectively shut down in the second quarter.
“Expectations for the third quarter remain uncertain, but prospects for a rapid return to pre – crisis levels of demand remain grim,” the bank stated.
The IDB noted that the total contribution of tourism is 40 percent or more in terms of both GDP and employment for Antigua and Barbuda, The Bahamas, St. Lucia, and Barbados.
“Taken together, this suggests that the Caribbean could be the most adversely affected region in the world in terms of the economic impact of COVID-19,” it continued.
“For the small, open economies of the Caribbean, the path for recovery also depends on external developments. The recovery of the tourism sector will depend on international cooperation on travel rules and sanitary protocols, as well as on economic conditions in source countries — particularly the United States, Canada, and Europe. Clearly, commodity prices will evolve according to international market developments.
“Even the gold price could drop somewhat if international financial markets return to long-term stability and gold’s safe – haven allure fades,” the IDB noted.
It added: “Oil and natural gas prices could strengthen if workers return to their normal commute patterns, but perhaps that will not happen. The possible reconfiguration of global supply chains could open, or close, opportunities for foreign direct investment in business process outsourcing and other global services.”
According to the IDB there are multiple external factors that pose opportunities and risks for a recovery of Caribbean economies.
“The recovery will also depend on the success of the crisis response and domestic transition policies . The recovery will be built on the efforts of households, businesses, and governments. Emerging from the transition stage, if many households and/or firms are bankrupt and if people are still getting sick, then the recovery is likely to be prolonged and slow.
The report added: “The risk of imported cases looms large as international travelers begin to arrive. One domestic factor that will need to be addressed is to recover fiscal sustainability following a buildup in public debt. Deficit spending in response to the crisis will result in an increase in debt.”