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360° resilience: a guide to prepare the Caribbean for a new generation of shocks

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By Julie Rozenberg, Nyanya Browne, Sophie De Vries Robbé, Melanie Kappes, Woori Lee, and Abha Prasad

SUMMARY

Caribbean countries, a set of mostly Small Island Developing States (SIDS), have a history of dealing with large shocks. The region is threatened by both economic and natural hazards.

Nations have specialized in tourism and commodity exports, disproportionally exposing them to global economic cycles through changes in tourism demand and commodity prices. They are also located in a region that is highly exposed to a range of natural hazards—from volcanic eruptions to earthquakes and hurricanes—which damage their infrastructure stock, reduce tourism demand, and destroy agricultural production. Hazards have often caused severe damage to economies and livelihoods in the region.

Despite their varying national capacities and exposure to natural hazards and economic volatility, the countries of the Caribbean have sustained long-term development progress. Their specialization in sectors where they have a comparative advantage (tourism and commodities) has led to relatively high income levels. Antigua and Barbuda, The Bahamas, Barbados, Sint Maarten, St. Kitts and Nevis, Trinidad and Tobago, and Turks and Caicos are high-income countries; and Belize, Dominica, the Dominican Republic, Guyana, Jamaica, St. Lucia, St. Vincent and the Grenadines, and Suriname are upper-middle-income countries. Haiti is the region’s only low-income country.

But high income levels have also come, historically, with high exposure to global business cycles and natural hazards, which has resulted in high economic volatility, high unemployment, and persistent inequality and poverty. Economic growth has slowed over the past 10 years, and more recently, the COVID-19 pandemic has demonstrated that, although the region was prepared to handle shocks, it is vulnerable to and dependent on changes in global tourism demand.

Taking a holistic approach to resilience, this report assesses the historical and future impacts of shocks in the Caribbean, policy responses to those shocks, and gaps in resilience building. It offers two main findings and a series of recommendations for policy makers.

Finding 1: Caribbean countries have achieved resilience levels that have allowed them to support economic development despite large recurring damages and losses from multiple hazards and shocks. But this relies to a large extent on informal mechanisms that neither systematically protect the poor and most vulnerable groups nor prevent the loss of human capital. Businesses in the region have invested in disaster preparedness, staff training, and backup infrastructure like water tanks and electric generators. Remittances from abroad have blunted declines in consumption after disasters. In many cases, governments have prepared adeptly for extreme events, also benefiting from regional collaboration mechanisms to monitor and forecast hurricanes and organize a coordinated response when the impact exceeds individual countries’ response capacity. Past efforts have, however, left some people behind. One in five people in the region still lives in poverty and past shocks have contributed to pushing people into and keeping them in poverty.

Finding 2: Caribbean countries are not prepared for the new challenges posed by climate change, compounded by uncertainty on future tourism markets and a lack of fiscal space. The strategies that have worked in the past will not be enough in the future. Climate change threatens to intensify natural hazards and brings new sources of volatility though impacts on health, agriculture yields, and coastal landscapes. The post-COVID-19 world brings more uncertainty on prospects for tourism. Many countries have also depleted their fiscal space and coping capacity while dealing with past crises.

These new challenges call for more consistent approaches to resilience, building on stronger institutions, robust analytics, and more transparent prioritization. To boost resilience and better prepare for the shocks and stresses of the future, this report recommends that Caribbean governments focus on three main areas:

  • Increasing government efficiency by improving investment management and infrastructure maintenance, clarifying procurement rules for emergency situations, allocating budgets transparently, ensuring fiscal rules are robust, and layering risk financing strategies

  • Empowering households and the private sector by increasing both the coverage and adequacy of social protection, strengthening worker skills for resilience, improving access to finance, and facilitating access to risk information

  • Reducing future physical risk by investing in critical infrastructure, better enforcing building codes and standards, systematically considering emerging and changing risks, and planning to build back better after shocks.