The Virgin Islands experienced the fourth-highest decline in gross domestic product of the Caribbean Development Bank’s 19 borrowing member countries in 2020, according to the CDB’s Regional Report: 2020 Review and 2021 Outlook, released late last month.
With its 18.9 percent drop in GDP, the VI found itself behind only the tourism-dependent countries of Anguilla, Turks and Caicos Islands and St. Lucia, which experienced declines as high as nearly 30 percent.
However, they weren’t alone in their struggles. In 2020, the majority of the CDB’s 19 borrowing member countries registered double-digit declines in Caribbean GDP, with an average contraction of 12.8 percent.
The worst hit were jurisdictions with large tourism industries, which also include the Bahamas, Barbados, Belize, Cayman Islands, Dominica and Grenada. Those jurisdictions saw an average drop of more than 70 percent in overnight visitors in 2020, which spilled over to affect other economic sectors, according to the bank Jamaica, which increased its agricultural production in 2020, still experienced a 10.4 percent decline.
Looking ahead regionally, the CDB is projecting 3.8 percent growth in the average Caribbean GDP in 2021, but that outlook “is clouded by the ongoing uncertainty caused by the global pandemic,” the bank stated in the report.
Guyana was the only economy among the 19 to report economic growth, which the CDB found was “solely due” to the start of its first oil production. Nevertheless, a drop in global oil prices resulted in lower-than-expected growth in the country.
Declining oil prices also caused an economic contraction of 11.1 percent in Trinidad and Tobago.
“Across the region, the fall in economic activity led to a steep decline in government revenues,” the report stated. “At the same time governments increased expenditure to support health sectors and to provide social support and economic stimulus. Primary fiscal balances worsened in every BMC.”
This trend led to fiscal balances — the difference between government revenues and expenditures — worsening in every BMC, averaging -4.1 percent of GDP compared with – 1.3 percent in 2019.
Increases in unemployment rates were recorded in many jurisdictions, including the Bahamas, Belize, Cayman Islands, Grenada and Jamaica, “and are expected in most others,” according to the bank, which added, “Unemployment rates were generally higher for women and for young people.”
The full report, with rates for all 19 member countries, was not available as of this week.
CDB President Dr. William Warren Smith said the pandemic “has underscored the importance of building economic and social resilience.” He added, “We can only reduce the susceptibility to external shocks when we accelerate the diversification of our economies; broaden our productive base; and take appropriate measures to build competitiveness whilst providing adequate safety nets to protect our most vulnerable groups.”
In response to the pandemic, the CDB provided more than $140.2 million in financing in 2020 and has secured an additional $50 million to use in 2021 to support the BMCs in mitigating the economic fallout and adverse social effects, the report noted.
Although the VI was not one of the seven countries and territories that has already benefited directly from the financing, it did receive a piece of the $3 million worth of personal protective equipment purchased for health care workers through a collaboration with the Caribbean Public Health Agency, the Caribbean Disaster Emergency Management Agency, and the Pan-American Health Organisation.
The bank said it did not expect a return this year to 2019 tourism levels, which in many countries had reached new records. However, tourism-dependent BMCs likely will experience some economic recovery in the fourth quarter, when tourism is expected to pick up as the mass rollout of Covid-19 vaccines continues, the report stated.
Nevertheless, risks including new waves of infection and possible new variants of the virus, as well as snags in the availability of vaccines in some countries, continue to be a threat to recovery, the CDB cautioned.
“When the pandemic diminishes, countries must continue to address the enormous economic challenges that confront the region,” the report stated. “Accelerated programmes to strengthen macrofiscal frameworks and broad-based structural reforms are required to address the development constraints limiting productivity and growth.”