SVG bracing for higher prices, fewer visitors amidst Middle East war

Prime Minister Godwin Friday says his government is bracing for the potential impact on St. Vincent and the Grenadines of the US-Israel war on Iran, saying that it has  “serious implications”.

On Saturday, Israel and the United States began a series of strikes against Iran targeting the country’s leadership, security forces and nuclear programme and missile sites. 

They said they aimed to induce regime change in Iran and to address concerns regarding its nuclear programme. The strikes are reported to have caused both military and civilian casualties in Iran.

In response, Iran has launched a series of counter-strikes against Israel, US military bases in the region, and military and civilian locations in Arab states that house US forces. 

Meanwhile, on Monday, the war in the Middle East triggered by the joint US and Israeli attack on Iran expanded dramatically, with casualties and destruction reported across at least nine countries, including major strikes on Tehran, The Guardian reported. 

“The bombs may not fall here, but they have serious implications for us and for other countries around the region, one of which, of course, immediately, you have conflict in the Middle East, you have the concern about energy and fuel cost shocks that will affect us,” Friday told a press conference in Kingstown on Tuesday.

He said that SVG faces “the high likelihood of experiencing a severe energy and fuel-cost shock over the next 12 months.

“Of course, it all depends on how this conflict plays out, whether it’s terminated fairly quickly, but we anticipate that there is going to be a very high risk of us experiencing increasing fuel costs,” the prime minister said at a press conference in Kingstown.

He told the media that higher fuel cost has “so many implications”, adding, “the effects throughout the economy, we know what those possibilities can be”.

Friday, who is also minister of finance, noted that SVG is highly dependent on tourism, adding that the sector is the largest contributor of foreign exchange to the Vincentian economy.

“Tourism creates jobs, and it’s one of the fastest-growing sectors of our economy. But when you have conflict in areas of the world that affect fuel costs and so forth, that affects the connectivity, it increases costs, and all of those things are factored into and people travel and so forth,” the prime minister said.

“… and so we anticipate that there’s a risk of a downturn, especially in the long-haul arrivals and also occupancy rates would be affected.”

The prime minister said his government has to be very alert, and we are studying the impact of the war and what can be done to mitigate it.

“It’s better to prepare. Even though we can’t control the outcome, we can’t control the effect of it, but we can control how we respond,” Friday said.

“And so that is, to some extent, within our power to do, and we are working hard to do.”

He said SVG also faces the risk of  “imported inflation and subsequent cost of living pressure, which we have experienced all too keenly coming out of the COVID crisis.

“And so we are very familiar with them,” the prime minister said, adding, “We’re still coping, reacting or responding to them now.”

He said the war in the evolving  Middle East “is something that is going to create serious problems for us, potentially” in light of the fact that many of the things consumed in SVG are imported.

“And when the cost goes up in the countries where they are being made, and the shipping situation creates greater concerns that is imported here and the price, it’s essentially imported inflation.”

The prime minsiter said that economists will have more technical terms to describe the situation than he would.

“So, we have to monitor this very carefully for the early warning indicators to see to what extent you look at freight and insurance quotes and so forth, supermarket tracking goods to see to what extent they are moving.

“And we have to, as a government, be alert to this, because we, as I said earlier, just months ago, we implemented measures intended to address the cost of living crisis that we’ve been experiencing by VAT-free shopping day, the salary, bonuses, the various measures that we did to assist persons, vulnerable persons and social assistance and so forth. That’s the intention,” said Friday, referring to the initiative taken by his government since coming to office on Nov. 28.

“And so here now we have to plan. We have to anticipate what some of the fallouts of this would be. There may be disruptions as well in shipping chains. We know that again, we know that term: supply chain disruption. We learn that during COVID. So it’s something that we are alert to, and we have to be aware that scarcity may be a problem,” he said.

“There’s certain things we may not be able to get, especially in building and construction, oil and supplies and so forth. These are things that, as a responsible government, you know the potential fallout from this conflict,” the prime minister said.

“As I say, even though we are not directly involved in it, the whole world is connected. Now. It’s so much a trade that we have to ensure that we’re alert to the possibilities, and that we take measures to mitigate them,” Friday told the media.