The economy is already declining but the new coronavirus will make it worst!
Freedom Speaks Column
Last week we indicated that in this article we would have continued the discussion in relation to breaking the cultural shackles that keep us from making economic progress. We still have a long way to go with this important discussion but in the face of the ongoing new coronavirus pandemic, I wish to pause that series of articles for a little while in order to share with you some of my thoughts on the impact this evolving international crisis could have on our nation, especially on the economy. I will also share views on what it will take to lift ourselves again should our worst fears surface.
The expectation among economist through-out the world is that the COVID-19 pandemic will fuel a global recession (an extended period of economic decline around the world). The virus outbreak is estimated have caused economic output in China to decline by close to 30% during the first quarter of 2020. This occurred as a lock-down took its toll as the country sought to stop the spread of the virus. The resulting business shutdown in China initiated the unfolding global economic troubles given that many industries in major economies are tied to China in one way or another. But as the virus spreads globally, major western economies are already moving to implement stringent measures to combat its spread. These measures are resulting in major disruptions to business that will continue to fuel the global recession. Economic growth in the USA could shrink by more that 10% during the second quarter of the year after slowing down to a mere 0.6% during the first quarter as a direct consequence of the fight against the virus. Moreover, many economies in Europe are expected to contract during the period of reaction to the virus as is already happening in Italy. This global recession may carry through to the third quarter of 2020 but it is really difficult to say how long the recession will last as this will depend on many factors including the success of countries in combating the virus.
As of writing, no confirmed cases of the virus have been reported in Dominica. We are thankful for that and pray that this continues to be so, but let take appropriate actions to protect our country. If the virus does reach our shores, it could overwhelm out health care system if our efforts at stopping or slowing its spread are not effective enough. Certainly, we may not have a choice but to put the country into lockdown similar to what we see unfolding in other countries. Such a lockdown will hurt our economy just as it is doing in other countries combating the virus. The Dominica Freedom Party suggest that the authorities increase efforts to encourage new social interaction practices even if there have been no confirmed cases of the virus in Dominica. This would give us a head start in slowing the spread of the virus if it gets here or if it is already here unknown to us as yet! For instance, it does not hurt to shut down schools for an initial period of two to four weeks as a pre-cautionary measure. In that period, the ministry of education could engage in efforts to develop an online platform for delivery of instructions to our children. Appropriate precautionary actions are prudent given the severity of the pandemic.
But even if the virus does not reach our shores, lock-downs in other countries and the resulting unfolding global economic recession is going to have an adverse impact on economic activity in our country. Moreover, interactions with regional countries will be severely disrupted if these countries go into lock-down mode.
But let us make it very clear that Dominica was already at risk of economic decline for 2020 even if the COVID-19 pandemic had not occurred. While output in the country was estimated to have grown by between 5% and 6 % during 2019, this was largely fueled by, construction expenditure financed from proceeds from the Citizen by Investment (CBI) programme; and by the recovery in tourism industry and agriculture industry from the impact of hurricane Maria. We have previously indicated that the economy was very weak prior to hurricane Maria and since then, recorded growth simply represents partial recovery but does not by any means suggest economic dynamism (new innovative or efficient activity replacing lost business) in the country. As for that matter, a major area of economic activity was lost – that fueled by the closure of ROSS University, hence the overall robustness of the economic declined.
Adding to the disaster of the "loss of ROSS" is the unfolding disaster of the "loss of the CBI"! We will discuss this and more in the next article when we will show how troubles with the CBI was already causing the economy of Dominica to crumble long before the impact of the COVID-19 virus! But the COVID-19 virus will make it worse.
Kent Vital Political Leader Dominica Freedom Party.