FORMER Minister of Finance Winston Dookeran has called for credible analytical leadership as he weighed in on the anticipated fallout of the covid19 pandemic on the global economy with particular reference to the Caribbean.
Noting we are in "unchartered waters” with the virus, he said the choice between "lives and livelihood" could soon be a harsh reality.
Dookeran recalled the March 11 statement of Director General of the World Health Organisation (WHO) Dr Tedros Adhanom Ghebreyesus in declaring covid19 a pandemic, that it was a crisis that would touch every sector, and his call for all to get involved in this fight.
Dookeran said, “In fighting this public health crisis, steps at suppressing the spread, enhancing the health system, seeking resources for immediate treatment and pursuing the protocol for discovering a vaccine have engaged societies and governments widely.
“But what is most telling is the economic fallout of this effort. Global economic activity will drop dramatically in an uncertain policy environment. Awareness of the full implications of this ‘falling off the edge’ is growing as the impact becomes multifaceted in several spheres.”
He said, as the economy enters a "loop type" cycle of shocks between demand and supply, old policy prescriptions for recessionary times might no longer work.
“The coronavirus crisis has induced a supply shock, reducing wages and production, which, in turn, fuel a demand shock – fall in purchasing power. This becomes a ‘loop type’ cycle of shocks."
He explained, "In growth models, shock absorbers mitigate the effects on growth but buffers and shock absorbers are weak in the Caribbean economy. Shocks are absorbed through adjustments in labour and austerity but that will work depending on the magnitude of the shocks.”
To prevent an immediate collapse, he said, it is argued that the size of the fiscal injection must be equivalent to the fall in the GDP.
“This is a tall order in any circumstances but has dire complications to debt, credit, incomes, and poverty levels. This is above the cost implication of financing modes used and the prospect of recovery in a loop-like cycle.
"We are in unchartered waters, and the choice between ‘lives and livelihood’ could soon be a harsh reality.”
Dookeran said measures currently being adopted by powerful and small countries are dubbed as ‘stimulus packages’ but argued, “This is the wrong description as it implies a ‘growth element’ when it is really a ‘survival package.'”
He said credible analytical leadership is called for and advanced that universities must become truly rigorous and entrepreneurial as he foresees unprecedented changes.
“Changes in research priorities and teaching methods initiated in this ‘non-normal’ period will likely remain permanent as the economic metrics change. This will call for new systems and a switch to the digital world.”
On the wider front he said new drivers of industry change might arise as well as more use of digital transaction, innovations in public hygiene, changes in the way the travel and tourism sectors operate and security of production of food and medicine.
Noting the pandemic could not be solved by internal efforts only, Dookeran said global co-ordination and diplomacy were needed to add new resources notably, technical, business and financial, to the solution matrix.