Minister of Finance Camillo Gonsalves did not sugar-coat reality as he told lawmakers and the nation what lies ahead a result of the economic fallout from the COVID-19 pandemic.
“Make no mistake. There are rough waters ahead for our public health, our society and our economy. We have never been down this path before,” Gonsalves told Parliament on Tuesday.
He told lawmakers that the COVID-19 pandemic is much more than a grave threat to the health of Vincentians.
“The rapid global spread of the virus has precipitated an economic emergency of unprecedented scope and scale. The international economy is grinding to a halt, as all conduits of global trade and commerce are severed,” Gonsalves said as he asked lawmakers to approve his fiscal package.
Lawmakers, late Tuesday night, approved the National Recovery and Stimulus Plan, which the minister said well exceeds EC$85 million and therefore approaches 4% of gross domestic product (GDP).
“Even in the midst of the steep tourism decline after the 911 terrorist bombings in the United States, airlines were still flying.
“Even in the catastrophic aftermath of the 2008 global economic and financial crisis, world trade continued. Further, the post 2008 crisis did not have the lingering public health uncertainties that beset us today.”
The minister said that St. Vincent and the Grenadines is “facing a one-two punch of collapsing tourism and global recession.
“The effects of the tourism shutdown will be felt immediately and are being felt. The impacts of the global recession may hit us later and last longer. In addition to this one-two punch, a third and potential knockout blow awaits in the form of the 2020 Atlantic hurricane season.”
He said that experts predict an above average hurricane season with 16 storms and eight hurricanes, four of which will be category three or above.
“According to the current predictions, we can only pray that our recent string of good fortune will continue and that we will be spared the impact of this busy upcoming hurricane season.”
Gonsalves said that the grim and ever present potential of a catastrophic climate event aside, “We must recognise the certainty, severity and complexity of the socio-economic calamity that now faces St. Vincent and the Grenadines.
“In the face of the challenges ahead, the government must act and in shaping our response.”
he said that the economic policy must be guided by three clear objectives, first and foremost, minimising the loss of life and strengthening the public health system to cope with more widespread infections.
Even as Parliament was still debating the package, SVG recorded its 8th confirmed case of COVID-19. Further, over 400 persons are in quarantine as a result of the pandemic.
Fears over the infectious disease have left Kingstown, the nation’s capital and its centre of economic activities, looking like a ghost town on the eve of Easter, the second largest religious celebration — after Christmas.
The minister said that the second objective is to minimise the economic impacts on vulnerable Vincentians, displaced workers and the most-affected sectors.
“And third, to keep the economy afloat through targeted stimulus spending, while maintaining macroeconomic stability and laying the groundwork to resume growth when the pandemic abates.”
‘entering a period of survival’
Gonsalves said that while there is no contradiction among the three objectives, “there is certainly some tension.
“As a small country with limited resources, we have to make difficult decisions about how to apportion money among our health care, bailout, and stimulus goals.”
He said the supplementary estimates represent his government’s considered judgment about how to best allocate scarce resources.
“Let us be clear, we do not have the ability or the money to heal the sick or to make every person whole or to bail out every business or to fully jumpstart the economy.
“In these rough waters, we are trying to keep our people and our economy afloat. We are entering a period of survival. After the pandemic, it will be easier to revive an economy or a sector that was kept afloat than one that drowned in the turbulent waters that we must navigate.
“Economic pain is unavoidable. However, together we can weather the storm, and together we can beat COVID-19,” he said.
Noting the size of the stimulus package relative to GDP, Gonsalves said:
“At such a size, this recovery and stimulus package is large. And it is an ambitious investment in our health in our people and in our economic future.”
‘Tourism is in deep trouble’
Gonsalves noted that on April 3, Kristalina Georgieva, managing director of the International Monetary Fund, called the pandemic “humanity’s darkest hour and a big threat to the whole world”.
Georgieva further said that the crisis was unlike any other in the history of the IMF in that the world economy had come to a standstill.
“We are now in recession. It is way worse than the global financial crisis,” Georgieva further said.
“Even as we in St. Vincent and the Grenadines continue to avoid the worst of the pandemic from a public health perspective, we have already been battered by the fast moving economic catastrophe.”
He said that the tourism and hospitality sectors have collapsed.
“There are no flights into the country, no cruise ships arriving and consequently no guests in hotels.
“Traditional mainstays of the tourism calendar from the Easter Regatta to Carnival are being cancelled or rescheduled. The consequential knock on effects for other sectors and the national economy are obvious. Tourism is in deep trouble,” Gonsalves said, adding that it is anybody’s guess when the sector will return to normalcy.
“Unemployment and underemployment are increasing rapidly,” he said, adding that rising joblessness is being driven primarily by closures in hotels and shutdowns in restaurants, entertainment and the informal sector.
“As a result, hard won gains in enhancing the lives of our most vulnerable Vincentians are under threat.
“Similarly, employment and economic slowdowns in our diaspora communities foreshadow potentially destabilising reductions in remittances, logistical challenges. Economic uncertainties have halted or slowed some important infrastructure projects here in St. Vincent and the Grenadines. As capital departs from developing economies for the relative safety of advanced countries, previously scheduled foreign direct investments will slow to a trickle.”
The finance minister said this has immediate implications for unemployment, and poses medium term challenges to SVG’s developmental timelines.
“Fewer tourists, less economic activity, disrupted supply chains, and reduced foreign direct investment, mean less revenue for the government to pay its own bills and advance its own developmental agenda.
“Economic shrinkage in St. Vincent and the Grenadines in 2020 is all but certain,” he said, noting that at the beginning of the year, the Eastern Caribbean Central Bank predicted regional economic growth in the Organisation of Easter Caribbean States (OECS) of 3.3%.
“Today, the central bank’s most recent projections suggest that the regional economy may shrink by almost 7%. This represents a 10% swing relative to the projections of just a few months ago.”
Gonsalves said that in SVG, various scenarios of the Ministry of Finance predict an economic contraction of as much as 5% versus “the moderate growth projections of just two months ago. “There is no sugar-coating of the fact that the COVID-19 pandemic makes 2020 a year of shrinking economies, growing deficits and mounting liquidity challenges across CARICOM. St. Vincent and the Grenadines will not be spared the massive economic fallout of this pandemic,” the minister said.