Unemployment in St. Vincent and the Grenadines is estimated to have increased by 10 percentage points since March.
That’s the estimation that Minister of Finance, Camillo Gonsalves, gave Parliament on Monday, even as he said the country is “weathering the economic storm as well as can be expected” amidst the COVID-19 pandemic.
Gonsalves said that since lawmakers approved the EC$69 million recovery and stimulus package on March 26, “the global and regional projections for economic decline have become more pessimistic.
“The world and St. Vincent and the Grenadines is looking at a more pronounced, more severe economic fallout than was anticipated even three months ago,” he said.
In SVG, the economy, like many others, is experiencing reduced productivity, depressed retail and commercial activity, non-existent tourism, and increased unemployment as the immediate result of the COVID pandemic, the minister said.
He said that within the formal sector, data from the National Insurance Services (NIS) indicate that 395 businesses have partially or completely shut down since March 1.
“These 395 businesses represent over 16% of the total active employers registered at the NIS. Over 3,000 claims have been filed with the NIS for employment benefits and displacement supplementary income,” the minister said.
He said this increase in claims suggests an additional 6% of the labour force is now unemployed.
“Considering the impact of the pandemic on the informal sector, we can safely assume that the unemployment rate has increased by more than 10 percentage points over the last three months,” he said.
Meanwhile, government’s current revenue for May declined by more than 18% relative to May 2019.
“Value added tax collections in May, which sometimes act as a rough proxy for commercial and retail activity, fell by 49% when compared to the same period last year.”
The minister said that other relatively small but significant sources of revenue, like alien land holding licenses, stamp duties and yacht licenses, “all suffered the expected collapse, as movement, migration and investment became more difficult during the pandemic.
‘early swells and choppiness’ of COVID-19 storm
“During the presentation of the supplementary estimates 10 weeks ago, the government cautioned that there would be ‘rough waters ahead’ in our society and economy’. Today, we are experiencing the early swells and choppiness of COVID’s economic fallout,” Gonsalves said.
“Nonetheless, we must give thanks that, to date, we are weathering the economic storm as well as can be expected. While our revenue has decreased almost 20% in May, the Eastern Caribbean Central Bank has reported that other OECS (Organisation of Eastern Caribbean States) countries have already experienced a 50% decline.
“While our unemployment rate will likely exceed 30% in the short term, the ECCB is predicting 50% unemployment rates in some of our sister nations. As indicated earlier, over 3,000 claims seeking unemployment assistance have been filed at our NIS.”
He said that in St. Lucia — whose population of 182,000 is 70,000 more than SVG —
the corresponding number is 22,000, with 43,000 seeking similar assistance in Barbados, which has a population of 287,000.
“In Antigua and Barbuda, Prime Minister Gaston Brown has estimated that hotel closures and lockdowns have caused over 20,000 residents their jobs in that country,” Gonsalves said.
Antigua and Barbuda has a population of 96,000.
“In this context, we try to put our hardships into perspective and give thanks to Almighty God and count our blessings, one by one.”
He said that in the context of the pandemic, SVG is fortunate to not be as dependent on tourism as some other CARICOM countries.
“We are fortunate that we had the luxury of time to craft an appropriate response to the pandemic. We are fortunate that friends, allies and development partners responded to our calls for cooperation,” the finance minister said.
“We are fortunate that production continued in our agriculture, manufacturing and construction sectors. And we are fortunate that the honourable Prime Minister charted a courageous and prudent course between complacency and hysteria based on science, the experiences of other states and the particular circumstances of St. Vincent and the Grenadines.
“The Honourable Prime Minister sought to build consensus among citizens, target vulnerable persons or dangerous activities and avoid draconian overreaction in addressing the Vincentian component of this pandemic. While there are still very rough waters ahead, the past three months could have been far rougher but for the Prime Minister’s resolute leadership and the maturity of the Vincentian people.”
ECCB predicts even worse ECCU contractions
Gonsalves said that during the March 26 presentation of the supplementary budget, the government had referred to projections from the ECCB that predicted a regional contraction of almost 7%.
“Today, the central bank is estimating economic contraction in the Eastern Caribbean currency union of between 10 and 20% in each country.”
He said that while his government wait for the updated projections of the International Monetary Fund, which are due out on Wednesday, the recently published June 2020 edition of The World Bank’s global economic prospects predicts a global contraction of 5.2%, the worst such decline in eight decades.
“Advanced economies are expected to shrink by 7% and output of emerging market and developing economies is expected to contract in 2020, for the first time in at least 60 years,” he said.
He quoted the Global Economic Prospects publication as saying: “Current projections suggest that the COVID-19 recession will involve a 6.2% decline in global per capita GDP, making it the deepest global recession since 1945/46 and more than twice as deep as the recession associated with the global financial crisis.”
“Dr. Kenneth Rogoff, professor of economics at Harvard University goes further stating that, and I quote, ‘The short term collapse in global output now underway, already seems likely to rival or exceed that of any recession in the last 150 years’,” Gonsalves said.
“Unlike previous economic crises, where there are winners and losers, or at least division between those affected and relatively unaffected, the Coronavirus pandemic has spurred a truly global collapse, over 90% of countries will experience GDP contractions in 2020-2021, the largest such share of countries in recession since the year 1870,” the finance minister said.