A HURRICANE OF A DIFFERENT KIND ON THE HORIZON FOR THE CARIBBEAN
A CDN Special Feature by Ricardo Blackman in Barbados
November 8th, 2017
The new from World Travel Market in London that growth in the Caribbean tourism sector for 2017 was now likely to be between one and two per cent, with a similar growth rate projected for next year, is not good for regional governments, particularly those like Barbados, where the Freundel Stuart administration may be pinning its hopes on a good 2017 tourism season, to help boost its fortunes in upcoming general elections.
Several Caribbean countries, including Antigua and Barbuda, Dominica, the British Virgin Islands, as well as Turks and Caicos Islands and Anguilla, have been impacted by the passage of Hurricanes Irma and Maria in September, resulting in several deaths and billions of dollars in damage.
Chairman of the Caribbean Tourism Organisation (CTO), Dioniso D’Aguilar, in his address to the World Travel Market Conference in London, likened the passage of the hurricanes through the Lesser Antilles as that of the Tale of the Two Cities by Charles Dickens. He said that the region’s tourism sector had “record performances in the first half of 2017, and for some CTO member countries, and by extension, the region, the worst of times with the passage of hurricanes Irma and Maria.
Aback of Mr. d’Aguilar’s mind, as he made his presentation in London, would have been the fact that the Caribbean continues to be characterized as an area of low economic growth and high public debt. For example, more than half of the member-countries of the Caribbean Community (CARICOM) are saddled with debt ratios in excess of 60% of Gross Domestic Product (GDP).
Between 2015 and 2016, only five (5) countries were able to reduce their debt burdens: Antigua and Barbuda (by 5.5%); Grenada (by 5.1%), Jamaica (by 4.5%) St. Kitts and Nevis (by 3.5%) and Guyana (by 2.2%).
These countries all recorded positive growth and all but one (Guyana) had primary fiscal surpluses in 2016. All other countries recorded an increase in their debt ratios at varying degrees.
The Barbados-based Caribbean Development Bank (CDB) was among a number of agencies projecting positive growth across the board for the region. These agencies had, in fact, said that growth was excepted to average 1.7%, but it was noteworthy that this projection was pinned on increased tourism activities and construction mainly in the tourism sector.
The reality of Caribbean tourism today is that although the number of visitor arrivals into the region is increasing, the value of the tourism economy is moving in another direction. Since 2007, for example, annual visitor spend has fallen by US$5 billion. Governments ignore this at their peril. If income is falling and profitability has yet to reach pre-2007 levels, then the Caribbean may be becoming less competitive in relation to other destinations and that current levels of tourism employment and tax revenue may not be sustainable.
There is no shortage of statistics or professional advice to suggest this, but a dearth of industry voices able to articulate this clearly or politically and promote a serious debate, not about where the industry is now, but where it ought to be in 20 years’ time.
But there is a hurricane of a different kind on the Caribbean horizon. Oil prices are more likely to rise towards $70 a barrel than sink back to $50 in the wake of the biggest political shake-up in Saudi Arabia in decades. Crude oil futures rose to highs going back to mid-2015 overnight after Saudi Crown Prince Mohammad bin Salman orchestrated the arrest of several princes and ministers recently.
The Saudis framed the purge as a crackdown on corruption, though some analysts said it was likely a move by bin Salman to consolidate power as he embarks on an ambitious effort to reshape Saudi Arabia’s economy.
As recently as OPEC’s last meeting back in May, several oil ministers were talking quite casually about $50 a barrel as a good price for crude. This is unlikely to be repeated when OPEC meets again at monthend.
CDN is of the view that a crude oil price of $70 per barrel will be more devastating to Caribbean economies than that inflicted by Hurricanes Irma and Maria. In Barbados, for example, where international reserves have continued a downward slide and currently cover just only eight (8) weeks of imports, a crude oil of $70 per barrel will put such pressure on the value of the Barbados dollar, that the country will have no alternative whatsoever, but to seek the assistance of the International Monetary Fund (IMF) and in a hurry.
By month end when OPEC holds its next meeting, the Caribbean should have more information on this other very dangerous hurricane which is just a matter of days away.