When Will Saint Lucia take Economic Diversification Seriously?
COVID-19 has exposed the fragility of the tourism industry which Saint Lucia mainly relies on. This was evident by the 23.8% decline in the Saint Lucian economy as recorded in the 2020 ECCB annual report. The case for economic diversification has never been stronger. The Saint Lucian Analyzer has announced an essay competition to solicit ideas and proposals from the youth on how they would diversify the Saint Lucian economy.
Percentage vs Nominal Values in Economic Analysis
The argument that the highest percentage GDP decline was due to Saint Lucia having the largest OECS economy is mathematically incorrect. The use of percentages and not nominal values was meant to allow such comparison among economies of various sizes. In essence, economic figures are normalized despite economy size. Furthermore, the data shows that islands such as Antigua and Barbuda which are even more dependent on tourism than Saint Lucia had a lower GDP decline and lower per capita COVID-19 cases and deaths. Therefore, the question remains, how much did the current administration’s policies of focusing almost exclusively on tourism result in this grim 2020 economic performance relative to the rest of our peer group?
In a recent MBC interview reviewing the much discussed 2020 ECCB report, accountant Richard Peterkin discussed economy diversification. He indicated that given Saint Lucia’s over-reliance on tourism that economic diversification will not be immediate: “The problem is when you are trying to recover in the short-term, it’s like trying to turn-around the Titanic and you cannot turn around and diversify in one year. Therefore, we need to concentrate on good tourism but not the detriment of everything else.”
However, the current administration doubled-down on tourism in their first 4 years at the expense of other sectors of the economy and failed to make tangible steps to diversify the economy during the better economic times and now the entire country is paying the price. Will Saint Lucia sink like the Titanic?
Christine Lagarde, former managing director of the International Monetary Fund (IMF) stated the following: “we know that economic diversification is good for growth. Diversification is also tremendously important for resilience.” The IMF also maintains diversification data in the following toolkit.
The current Government provided generous incentives to projects such as the Pearl of the Caribbean which promised the following: “The US$2.6 billion development is the biggest resort project undertaken in the Caribbean and will include a marina, racecourse, resort, shopping mall complex, casino, free trade zone, entertainment and leisure facilities and a residential component including villas and apartments, positioned across three sites. It aims to raise St Lucia’s profile with the elite, while also transforming the economic and social landscape of the nation. The latter will be achieved by raising economic activity in the south of the island and providing a significant amount of jobs for the locals.” Has any of these grandiose promises been a reality for Vieux-Fort? The tourism-first strategy by this administration backfired due to COVID-19. This resulted in the GDP of Saint Lucia prior to the upcoming 2021 general elections being less than the 2016 GDP of Saint Lucia.
Tourism in a Post-Pandemic World
The IMF released a paper in February 2021 analyzing the impact of the COVID-19 pandemic on tourism in the Asia Pacific region, Latin America, and Caribbean countries. This paper indicated that countries need to rethink the tourism model and create opportunities for diversification through policy support and structural reforms. Countries should shift from mass tourism to low-density high-end tourism and promote more sustainable tourism. This would mean that the authorities should focus less on the total number of arrivals and more on the total spending by these tourists. A tourism satellite account would significantly help our government to make data-driven decisions.
Eliminate policy bias unduly favouring tourism relative to other sectors. It is recommended that the bias that exists in countries like Saint Lucia for tourism projects be leveled and other sectors are provided with equivalent incentives. The report also recommends that the focus needs to be spent on developing long-term policy solutions to heal the scars of COVID-19 by doing the following: creating the new normal for tourism industry by strengthening healthcare systems, shifting to sustainable tourism models, investing in new technologies, and diversifying within and away from the tourism industry to avoid dependence on a single sector of the economy.
Saint Lucians will look to its leaders to implement a meticulously calculated approach for economic recovery which includes diversification as a key focus. This will require tough interim decisions by our government so that they limit the burden on our future generations. We may very well be in a temporary world of economic hurt.
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