World Bank hints that 2020 Caribbean downturn may be difficult to reverse

The Word Bank Tuesday suggested that there would be a “degree of recovery” in the Caribbean Community (Caricom) countries this year despite the effects of the coronavirus (COVID-19) pandemic, but warned also that it would not be enough to make up for the downturn in 2020.

World Bank President David Malpass told the Caribbean Media Corporation (CMC) during a 45-minute round-table discussion with journalists from Latin America and the Caribbean that while he would not want to agree with the 3.8 per cent the Barbados-based Caribbean Development Bank (CDB) projected, the Washington-based financial institution would soon release its own figures.

Last month, the CDB said the average gross domestic product (GDP) for the Caribbean this year will be 3.8 per cent, but warned also that the projection is clouded by the ongoing uncertainty, caused by the global COVID-19 pandemic.

The Caribbean Development Bank in St Michaels, Barbados, projected that the region’s gross domestic product will grow by 3.8 per cent in 2021. (Photo: caribank.org)

“We will be coming out with our own forecast for the region, but your general point is right that we expect there to be a degree of recovery in the Caribbean but not enough to make up for the down turn in 2020.

“So I don’t want to exactly agree with the specific number because we will be coming out with our own and you know how economic projections are. But certainly the thrust of that …(is) that there is some rebound or some recovery going on but not nearly enough,” Malpass said.

A new ‘starting point?

Nonetheless, he argued that Caribbean countries would have to implement new policies and, as a “starting point”, recognise that COVID “marks a dramatic change in the way countries will interact.

“That is important to consider in terms of tourism, for example, that there is a change there and it makes all the more important the structural reforms that are needed country by country.

As Caricom countries continue to reel from the coronavirus crisis, the World Bank has encouraged the economic bloc to implement new policies in recognition that the virus has changed how countries interact. (Photo: CARICOM)

“Within the Caribbean, we see dramatically different results in different countries based on the specific choice of policies. I happen to strongly support the currency pegs Barbados and The Bahamas have used over the years. I think that gives stability to them and makes for more attraction to investment.

“But different countries are using different policies and techniques and I think the policies need to be tailored or need to be developed by each country in a way that allows for growth and market expansion”.

Private sector as a key contributor

The World Bank president said that there was also the need for the private sector to play a significant role in the development of the region going forward.

Members of the Private Sector Organisation of Jamaica’s board outline the business lobby group’s strategy for the 2020/22 administrative period at a press briefing on January 10, 2020. (Photo: Chris Lewinson/Caribbean Business Report)

“There has to be an environment where people, especially the locals, want to invest in building the countries and that’s a challenge that needs specific policy changes to make each of the island states more attractive,” he said.

“We are prepared to work on this, this is something I worked on extensively in the 1980’s and into the 1990’s from the US Government side. There are immense challenges but they can be solved.”

Prioritising trade, digital inclusion

Malpass said that trade was also an important area for development of the region in the COVID pandemic era, noting the trade links with Central and South America represent an area of opportunity.

“Everyone is changing rapidly. Guyana is changing rapidly, the Central American countries are changing rapidly, so there has to be some flexibility within the various agreements that are made on trade,” he added.

World Bank Vice President for Latin America and Caribbean, Carlos Felipe Jaramillo, said that the digital divide is a “huge problem” that the region must also come to terms with as quickly as possible.

Carlos Felipe Jaramillo, World Bank vice-president — Latin America (Photo: World Bank)

“That’s why we have put together a large project for a number of the Caribbean islands called the Caribbean Digital Transformation Project. It is about US$100 million, it started last year and it is about widening the access to digital across the entire population and improving the skills to use the digital and improving the possibilities of doing more enterprises.

“New companies that can export digital services which is important for economies that so far have been to concentrate exclusively on tourism. They do need to diversify,” Felipe added.

A role for the World Bank

Regarding the World Bank’s financial contribution towards dealing with e COVID-19 pandemic, Malpass said that the Washington-based financial institution has programmes in Latin America and the Caribbean.

‘We have health related programes in 24 countries and we will continue expanding that. We have vaccination programmes (and) so far since April of 2020 we have committed US$7.4 billion to the region…and it looks like in our fiscal year 2021, which ends on June 30th, we would have committed US$10 billion to the Latin America and Caribbean region.

Since April 2020, the World Bank has committed US$7.4 billion to facilitate economic recovery in the Latin America and Caribbean region. (File photo)

“The projects go through the countries, we are talking Mexico and Guatemala, Panama, Brazil, some of the island states such as St. Lucia, Grenada, and Dominica. And in each we are working in different ways based on what the countries wanted and what they need to do to improve the investment climate,,” he added.

Malpass said that it was also important for the region to determine “whether we go into new projects, into the different economy that is going to be post COVID or do we end up stuck in that resolution, challenges that are hard to get through.

“So I think what is needed is for the region to have a tremendous amount of energy in each of the countries and also to inspire globally ways to get through this. So the World Bank will try to do all we can to help. We have been working through the COVID response, but the challenge is huge.”

He said that climate change must also be taken into consideration emphasising also the need to reduce greenhouse emissions.

“One of the important areas of this is in the agricultural sector and the land use sector which end up generating a large percentage of the greenhouse gases that come from Latin America, So it is critical that we work on all of those issues,” he added.

The World Bank estimates that at least 34 million people will enter what it describes as the “new poverty” line and said it was also important for the region to implement measures to reverse poverty.

“We think targeted aid is very important in reversing the poverty levels. I have mentioned multiple times  the importance of private sector development as a way to create jobs for new entrants, for people at the low end of the income scale.

“The best job creation programmes we know come from small businesses, starting up and hiring workers that might not be hired by big businesses…so that becomes a very important part of getting the poverty reduction goals (and) that’s the mission of the World Bank,” Malpass said.