Tourism is the “possible” key to the debt challenges Caribbean countries now face.
That, said Caribbean Centre for Money and Finance (CCMF) junior research fellow, Julia Jhinkoo, was especially so for Barbados and other islands which depend heavily on this sector.
In an analysis on the issue, she said while the Caribbean “has proven itself to be resilient, surviving financial crises, natural disasters and political unrest”, the last ten years “have been a demanding time for many economies of the region, with low growth levels, high inflation rates, high unemployment rates, fiscal imbalances and high debt levels”.
Jhinkoo pointed to an “uneven growth dynamic” within “the CARICOM-Caribbean region”, with the countries with most natural resources (Belize, Guyana, Suriname and Trinidad and Tobago) “having relatively stable economic growth rates in their economic activities”, while the “tourist-dependent” countries (Aruba, The Bahamas, Barbados, Curaçao and St Maarten, Organisation of Eastern Caribbean States, Haiti and Jamaica) were “experiencing stagnant or negative growth rates”.
“In the 1960s and 1970s most Caribbean economies shifted their dependency from agriculture to tourism. Economic activities with the region have been stagnant in particular for countries that were tourism dependent . . . . Economic activity is expected to remain below four per cent in 2014,” she said.
“The role of stimulating economic activity was then taken up by governments. In all CARICOM economies governments had to finance projects that would generate some economic activity within their country.”
The result was “fiscal imbalances in some cases became unsustainable”.
“The increase in public spending on social programmes, education and job creation has resulted in high budget and trade deficits financed primarily by borrowing. High debt levels and weak growth have kept the fiscal positions in Caribbean economies under strain, in particular those economies whose mainstay economic activity is tourism,” Jhinkoo added.
The problem she pointed to was the fact that while current rising debt levels of CARICOM economies was “worrisome”, “the tourism dependent economies on average have higher debt levels than the commodity dependent economies”.
Fiscal sustainability
“The debt burden of the CARICOM countries is a major problem that needs to be addressed. For the year 2014 there have already been three conferences in the Caribbean region that focused on the debt burden and fiscal sustainability of the region.”
The CCMF representative identified some issues that “should be considered if tourism in the Caribbean is to be the key to improving the debt burdens of the region”.
These were finding new markets, improving the efficiency and competitiveness of the Caribbean tourism as a single destination product, and making travelling to and within the Caribbean region more accessible and less costly.
(SC)