Lights Out for the ECCU Economies? (Part 2)

Part 2: Stability or Growth? Pick your Medicine

Last week we talked about the economic impact that the COVID-19 pandemic has had on the economies of the Eastern Caribbean Currency Union (ECCU) including the significant decline in tourism activity, lower remittances and a rise in debt and unemployment compounded by reluctant local and foreign investors. As we saw last week, that data is not pretty. Global GDP is projected to fall by 4.4% in 2020 and by 16.2% regionally. The countries of the ECCU, already burdened by high levels of public debt, are projected to see their debt to GDP ratio rise to 70% and above.

The data paints a picture of many fiscally weak economies, highly dependent on tourism- and while our Governments are doing a fine job to allow us to safely welcome tourists who still want to come to our beautiful Region – is more of the same really the way forward? Do our Governments continue to borrow towards supporting the vulnerabilities of our economies?

I say no, borrowing towards stability may be the medicine we know, but it is not the medicine we need if we are to truly emerge from this crisis stronger. Our energies and our resources would be better spent on supporting a pivot to growth spending to stimulate our economies. In doing so we can lay the framework to encourage development of new and different industries – to create jobs in the short term and build more resilient economies in the longer term; whether the choice is direct government spending or to provide incentives for the private sector investment.

Some new industry options on this path have been already shared in the public domain. They include:
• Technology based industries including e-health, security and consulting and e-commerce
• Industries which are focused on exports other than Tourism OR focused on regional sustainability including the creative industries, agro-processing and the food and beverage sector
• Environmentally and socially responsible industries including solar and wind energy, and the blue economy

Governments have an active role to play in creating an environment that is supportive of this kind of growth especially when it comes to attracting foreign investors who are not only interested in a return but also interested in the sustainability of our Region and can stand up to the scrutiny of regulatory due diligence.

Ease of doing business, largely influenced by harmonisation, across markets, financial sectors and legislative frameworks, is key here. Looking at the World Bank’s 2020 Ease of Doing Business Survey, countries within the ECCU rank between 93 and 146, out of 190 countries and we’ve slipped since 2018. Harmonising how we do business across the ECCU is one reform that could help in this area, as would the harmonisation of the financial sector and legislative frameworks across the Union.

So, I offer my medicine of stimulating our Region’s economy to Growth. Making the decision to pivot in this direction is the first step and will require specific and different support from other players, which we will discuss next week in the last blog of this series. I look forward to your thoughts and comments, as always.