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Vulnerability of Eastern Caribbean Countries

News and Press Release
Originally published


What all small island-developing states have in common is their susceptibility to a wide range of risks and a limited capacity to deal with these when they occur. The sudden outbreak of novel coronavirus (herein COVID-19) has highlighted the immense challenge of dealing with a new type of crisis for the region. With the timing of COVID-19 likely to overlap the hurricane season this year, many lives and livelihoods are at risk and remain vulnerable in years to come.

Why is the Caribbean most in need of assistance?

By far the most frequent type of disaster to hit the Caribbean is natural. According to IMF research, of the 511 disasters worldwide to hit small states since 1950, around two-thirds (324) have been in the Caribbean. Their analysis indicates that this region is up to seven times more likely to experience a natural disaster than larger states, and when one occurs, incur as much as six times more damage. Climate change will only intensify these events.

Vulnerability of the Caribbean is multi-dimensional and includes economic, social and environmental factors. The frequency of disasters in this region means that recovery can take years as experienced by Dominica and Antigua and Barbuda in 2017 following the passage of Hurricanes Maria and Irma.

Economic diversification is very limited. Their size, limited resource bases and remoteness constrain development and the Eastern Caribbean’s ability to build resilience. The Caribbean also faces significant ‘brain drain’, with many highly skilled people opting to move overseas to work. Regional integration still has some way to go and in the absence of a strong business enabling environment - with the Eastern Caribbean ranked above 100 (190 = worst) for doing business - investment and innovation are stymied. These inherent structural problems have prevented the Caribbean from reaching itstrue economic potential.

The services sector dominates economic activity contributing close to three-quarters of GDP in some Caribbean states. The Eastern Caribbean is heavily reliant on tourism, which for some contributes as much as 50% of GDP and provides jobs for up to one-half of labor forces in this region. While tourism is the Caribbean’s most prized asset - with around 80% of tourist arrivals from the US, Canada and the UK - an overdependence on this sector makes it a key vulnerability for the region in the current health crisis.

COVID-19, through the tourism sector, has caused huge social and economic disruption for the Caribbean. Jobs have been lost and tourism related businesses closed because of this pandemic. Government stimulus packages, working through existing social safety nets – mainly national insurance schemes – have had limited effect as many depend on the informal sectors for their jobs and livelihoods. With the informal sector in some Caribbean countries as much as 40% of GDP, this “health” crisis will likely cause poverty and inequality to rise substantially in its wake.

Many Eastern Caribbean states are net food and energy importers and highly vulnerable to sharp price swings. COVID19 has been highly effective in disrupting international and domestic supply chains. The longer this crisis lasts, the disruption to international supply will spill over to the Caribbean and risk this region’s own economic revival ironically at a time when it should be investing in preparedness ahead of the hurricane season.