Major risk

BARBADOS and other tourism dependent economies in the Caribbean could be hard hit if there is a widespread global recession brought on by the Covid-19 virus.

This is the view of Economist and former Governor of the Central Bank of Barbados, Dr. Delisle Worrell, in a commentary on the virus which is spreading across several countries after having first started in Wuhan, China.

Dr. Worrell said that the immediate impact of the virus on Barbados and the Caribbean comes from the fear and anxiety which it has caused.

He has said that Tourism is the biggest source of foreign exchange and growth for Barbados and much of the Caribbean, and that apprehension about COVID-19 has already begun to affect tourist travel.

The Economist reasoned that if the spread of the virus can be contained, losses may be temporary.

“However, in the event of widespread recession in economies worldwide, the Caribbean will not escape major losses,” said Dr. Worrell who served as Governor of the Central Bank of Barbados between 2009 and 2017.

Dr. Worrell maintained that the Covid-19 virus is a challenge to all of humanity; it is not only a Chinese problem.

Moreover, the effectiveness with which the Chinese economy recovers from the impact of the virus will benefit all of humanity. According to him, “Chinese production is already more important to global output than US production: China is the world’s largest trading nation, and its trading dominance is probably undervalued, because of the difficulty of pricing components that are produced in China for products made in the US and elsewhere.”

He is of the opinion that there is no way to disengage Chinese production from global supply chains. As such, companies hopefully will not try to do so; if they do, their products will become more costly and fewer consumers will be able to afford them.

Globalisation is already a reality, and China is the country that is most deeply embedded in global networks of trade. China has made the greatest contribution to the well-being of all mankind, not just the Chinese, in the 21st century, by making goods and services more affordable. A reduction in Chinese production or a reduction in Chinese trading and financial links with the world, will make all of humanity worse off. The overall supply of goods and services will fall, and prices everywhere will rise. The virus reinforces the lesson of the US-China trade war: anything that interferes with the movement of goods, services and finance, especially when it involves the world’s largest economy and the world’s largest trading nation, will make both producers and consumers worse off, all around the world.

All countries need to cooperate through international organisations, including the World Health Organisation (WHO), the International Monetary Fund (IMF), the World Trade Organisation (WTO) and World Bank, to ensure cooperative policies and equitable rules of engagement, for transactions across the globe. Markets work well only when there are regulations that are applied even-handedly to all participants. The virus is a further reminder of the need to support and adequately finance all the global institutions of governance, because they are the only legitimate sources of impartial judgement and equal treatment of all peoples.

The Government of the People’s Republic of China has gone well beyond its international responsibility, and it has set a demanding global standard for all nations to adopt, according to Dr. Worrell.

It has shown full cooperation and information sharing with WHO and an international network of scientific research, from the earliest days of the crisis. It has taken swift, comprehensive and decisive action to contain the virus so it could be thoroughly studied before it had a chance to proliferate widely. (JB)