Finance Minister Camillo Gonsalves availed himself of opportunities presented by the media launch of his government’s latest economic stimulation strategy called PYRME to offer what he qualified as being his “first opportunity to refer to the COVID pandemic from the perspective not of health but of finance and the Vincentian economy and indeed the regional economy.”
Although the national focus on COVID-19 thus far has been on the health side with some emphasis on the “preparedness of public health systems, mental readiness, border control and the like,” Minister Gonsalves, while recognizing the importance of this scrutiny sought to delineate the “significant and indeed a severe potential for economic upheaval in the Caribbean region and in St. Vincent and the Grenadines in particular.”
Gonsalves is “already seeing significant impact” which he describes as “not fair to say [comes] from the virus because we are still relatively insulated from the virus having only recorded one imported case in St. Vincent and the Grenadines; but from a public reaction and the regional reaction to the COVID pandemic.”
One of the several impacts noted by the 47-year-old Juris Doctor (as awarded by the Washington University Law School) include the “economic falloff due to the decline in tourism alone.”
Minister Gonsalves sited a recently convened meeting with “all the governors of all the central banks in the CARICOM region and their estimates range from a 20% fall off in tourism to an 85% falloff in tourism in the immediate term.”
This august grouping of Caribbean financiers, according to Finance Minister Gonsalves, attempted to ascribe a monetary value to the COVID-19 economic effects on the region.
“Now if you’re economy is based – 1/3 of it is based or ½ of it is based or 2/3 of it is based on tourism and tourism declines by 50% or by 80 %… it’s going to create, it is already creating economic fallout in the region and when we top it all up the central bank governors suggest that the number is going to be in the billions of dollars in the CARICOM region for the economic losses as a result of the decline in tourism alone.”
Gonsalves also reported on “some initial estimates” published by the Eastern Caribbean Central Bank that is meant to guide financial ministries and Prime Ministers in their response to COVID-19.
“They released a number of scenarios. One scenario where they say we would get this thing under control by June, a second scenario where they say it’s going to drag into the late summer months and a third scenario where they say all of these shut downs throughout the world would lead to a global recession.
“And they project what would happen to our sub-region in each of those scenarios. Their best case is that we will go from the initially projected 3.5% growth down to 2% growth… and their projection in the event of a global recession is that the economies of the region will contract – so there will be no growth we will shrink – by about 2%.”
As evidence of the ongoing contraction being faced by the local tourism industry, Gonsalves tabled, “I’ve been advised that 80% of the remaining cruise ships coming to Saint Vincent and the Grenadines for the year have cancelled. So we’re having reduced tourism arrivals.”
Air travel, he noted, is also impacted even as his father and Prime Minister announced possible measures to boost airport arrivals here last weekend.
“The governments of the region already heavily indebted, will probably have to borrow more money to pay for all of the things that we have to do – not only in direct preparation for COVID but to stimulate economic activity; because if economic activity falls off in this sector we have to try to build it up in another sector.”
A sharp increase in unemployment due to the down turn in tourism based economic activity is one obvious impact that the Minister noted as well as the heavily reduced levels of remittances from overseas.
The “challenges to various private and public sector projects that are underway or scheduled to be underway in St. Vincent and the Grenadines,” was another example of the negative impact COVID-19 is already having on the local economy.
“This is not related to community spread or transmission in St. Vincent and the Grenadines. We still don’t have community spread. This is all, if you boil it down as a result, in our local context, of one person coming from overseas having the virus and in all likelihood surviving it.”
“The global cruise ship lockdown would mean the displacement for thousands of Vincentians who work on cruise ships. The estimate said about 2500 Vincentians … who work on cruise ships from St. Vincent and the Grenadines globally. Hundreds of those would be coming home because the cruise ships have shut down and hundreds of them would be coming home without a job,” Gonsalves explained further.
Foreign Direct Investments here is also directly affected by the COVID-19 pandemic.
Gonsalves used the ongoing fisheries project branded as the Rainforest Seafoods processing plant that is being built in Calliaqua to better illustrate this perspective.
According to him over 45 Vincentians were employed at the primary construction phase of the project which has grounded to a halt due to the adverse COVID-19 effects on the intended markets. The minister reported on a phone call via which he was informed of the investors’ decision to cease construction “for the time being because of the COVID outbreak.”
“Much of Rainforest’s income streams come from two sources: 1) the sale of sea food products to hotels – primarily hotels in Jamaica and the Caribbean region and 2) from the sale of live lobster in China and Hong Kong.
“It is impossible for them to sell live lobster currently because there are no flights going from the United States to China…. they were buying lobster but they couldn’t sell the lobster. So they started to freeze lobster in the hopes that they could sell it elsewhere.”
That potential, alternative market is also suffering from the pandemic as, “the elsewhere where they would like to sell it, is to hotels but the hotels are down to 20% capacity sometimes zero % capacity. So there’s reduced demand from the hotels, there’s zero demand from China and they have made the decision essentially that they have to ride out this storm financially and so it is not in their interest to continue, at this time, the construction.”
Imposed travel restrictions present another dimension of the impact being endured by the Jamaican headquartered processor and supplier of premium quality seafood, according to the Minister.
“The building that they’re going to erect in Calliaqua comes from China and it’s en route from China. But for the building to be assembled 2 Chinese men have to come to St. Vincent to supervise the assembly of the building; otherwise the building would not receive the warranty that the manufacturer send the building with [sic].
“So they have a money crunch… and the building that is coming has to be supervised by the two Chinese engineers who can’t come into St. Vincent and the Grenadines because they’re coming directly from China and they have to be quarantined for 14 days.
“So they have said, ‘we are not pulling out of St. Vincent and the Grenadines, we’re still very much interested in St. Vincent and the Grenadines but we are experiencing a cash crunch right now and there are difficulties getting the necessary people and experts we need from China to St. Vincent to supervise this project.’
“So while the building – the pillars, the columns – are on the sea in container currently coming from China, it is likely that they’ll have to sit on the wharf for a while until Rainforest is able again to resume construction when there is an up-tick in tourism activity in their main markets and a return to flights.”
It’s not all doom and gloom, said Minister Gonsalves who also has the responsibility to oversee the economic development of SVG. According to him, other sectors are performing well even in the face of prospective hospitality industry players indicating their desire to “press pause on some of the activities that they would like to engage with the government and people of St. Vincent and the Grenadines.”
Gonsalves summed up the situation “from an economic perspective, a fiscal perspective” as “unchartered waters because never before has a single Vincentian who is not dying, thankfully, triggered this type of economic fallout – obviously it’s not her fault, I’m being a little glib there – it’s the response to the entire COVID pandemic that’s causing this.”
However the fact remains that private sector activity, here, from FDI is already being affected due to the complications surrounding the pandemic. This in turn, Minister Gonsalves warned, “would affect our own programmes and projections for the year 2020.”