Jack: The global economic crisis, the most severe challenge to OECS

The future of the economies of the small island states making up the Organization of Eastern Caribbean States (OECS) hinges on a few factors.{{more}}

Economic and Financial challenges, such as the recent economic fallout which began in September 2008; risk of hurricanes and other natural disasters and social challenges such as poverty, crime, diseases and unemployment are all factors which put the sustainability of these states at risk.

These factors were put forward by Jehann Jack, Vincentian economist with the International Monetary Fund (IMF) as she delivered a presentation on ‘The Challenges to Economic Development and Growth in a new OECS’ at the eighth St Vincent Girls’ High School (GHS) lecture last Thursday, December 16 at Frenches House.

According to Jack, a former student of GHS, the first and most severe challenge in the recent past is the global economic and financial crisis.

“Of course, we in the OECS have not been spared from the ravages of the global economic downturn.”

“Our economies, being small, open and highly vulnerable to external shocks, suffered a sharp contraction in economic activity occasioned by the crisis which exacerbated a secular decline in growth rates observed from the 1990s,” Jack explained.

This decline in global trade and the sharp drop in consumer and business spending resulted in a lower international demand for goods and services produced in the region. Businesses were forced to cut production and lay off workers.

“As a consequence, our economies stalled in 2008 then contracted in 2009, with the trend likely to continue into 2010 and 2011,” she said.

She added that the developments in the insurance sector, with the CLICO and British American Insurance companies, threatened to derail the financial soundness which we have enjoyed for the past two and a half decades.

“While the matters regarding these two institutions have not yet been entirely resolved, efforts are well advanced to bring some comfort and relief to the affected persons.”

“In addition, the unfortunate events at the Bank of Antigua, following the arrest of its owner Allen Stanford, in February 2009, tested the resilience of our commercial banking system,” Jack further explained.

With the islands’ geographic location, Jack explained that the constant threat of hurricanes and the effects of global warming should not go unnoticed.

“A separate UN-commissioned report, Caribsave, which was also released during the climate change conference, warned that the Caribbean could lose billions of dollars due to damage to hotels and resorts, power plants and the air and sea port infrastructure from rising sea levels alone,” she explained.

Lastly, Jack pointed out that while data on social indicators, such as poverty and unemployment, are lacking and outdated, the latest statistics in most OECS member countries suggest that poverty rates range from 18 per cent in Antigua and Barbuda to 38 per cent in Grenada and St Vincent and the Grenadines, and that unemployment rates as a percentage of the labour force range from 5 per cent in St Kitts and Nevis to 25 per cent in Dominica.

She noted that some governments had already begun addressing the issue of unemployment by offering skills-training aimed at unemployed youths.

But the issue of escalating crime is fast becoming a problem.

“Escalating crime can have serious ripple effects on economic growth, particularly in the tourism industry and the financial sector, which are very sensitive even the perceived threat of criminal activity,” Jack contended.

“The other more nuanced effects of crime on economic growth and development are many; the most obvious of which is that intimidation and the fear of violence can have a negative impact on production and productivity,” she continued.

As she offered recommendations for the way forward for the OECS small states, Jack highlighted agricultural diversification, tourism development, the investment in clean energy and private sector development as the way forward.

She added that while some Eastern Caribbean Currency Union’s member states have adopted the United Nations’ Millennium Development Goals, rising food and fuel prices and the Great Recession are impeding advances in targets, such as eradicating extreme poverty and hunger, jeopardizing the likelihood of achieving some of the goals by 2015.

“The global economic environment is still not benign; but even facing such headwinds, the regional outlook is encouraging, having signed on to take the OECS Economic Union process forward, the OECS is another step closer to fully integrating its economies.”

“Member governments should be steadfast in seeing the process through so as to achieve the benefits of a fully integrated region,” Jack opined.

As has been the norm in the lecture series, a student, in this case, Kayrel Edwards, was presented with the achievement award for her outstanding all round performance.

Last week’s lecture was hosted by former GHS student and Deputy Headmistress Ercelle John-Thomas.

The next lecture will be held on January 6, 2011, when Ambassador Betty Boyea-King will speak on the topic ‘Women in Government and Politics’. (DD)