OK, we all agree that 2020 was not a good year. And we know our COVID-19 position now: lower incomes, high debt, lower cash flow, restricted travel, rising unemployment and evaporation of many business opportunities for our citizens. So, what should our priorities be for 2021 and how should we address them? Our immediate concerns should be equally obvious: (1) continue to stay safe and (2) re-load our economy.
First, to stay safe we should write-off the 2020-21 tourism season and reinforce our adherence to COVID-19 protocols. Despite what you are being told, opening up our economy in late 2020 is still too dangerous. What we are not being told is that the PCR test for COVID-19 is only 70% accurate. Put another way, 30% of the people who have the virus and are asymptomatic, will have “false negative” results during the first week of being tested.
More importantly, some carriers may never display strong symptoms of the disease at all. Therefore, at least some of our visitors are going to bring the virus with them and are going to slip through our virus screening net. Because they will stay at approved destinations and have the right not to be tested again if they opt not to leave that location, the virus is likely to be transmitted to workers who are employed in those establishments. Thereafter, it will be systematically spread within our society.
Mathematical epidemiologists will confirm that there is still a risk of contagion even if 2 tests are done for COVID-19 (e.g. prior to departure from visitors’ countries and after a 4-day quarantine).
But if the risks are small, why shut down Tourism now? As it stands, we are dodging the issue of whether we should place the well-being of Grenadians above the immediate prospect of income from visitors. But when the virus does re-enter Grenada, we could be forced into lockdown again – a scenario that would finally bankrupt many of the now marginally viable smaller businesses and push more of our people into unemployment and poverty.
Expert advice is that COVID-19 is likely to be with us for another 2 – 10 years, vaccine or no vaccine. So why should we put our health and economy at risk because some businesses want to “return to normal” as quickly as possible? Why not wait for a vaccine, which could be available in mid-to late 2021?
The vaccine would be used to first inoculate our population before we open up to visitors again. Rushing ahead makes no sense because the trade-off is unthinkable – which is, “encourage higher economic activity now at the risk of going under ourselves next year”.
I predict – at the chance of being proven wrong – that we could see a return of COVID-19 to Grenada with further substantial consequences if we continue along this path. Other countries – Spain, Israel, France, the UK, Trinidad & Tobago – are now experiencing spikes in contagion. If this happens to us, the costs to our country – in lives, health care, lost government revenue and sustainable income – will be extraordinarily high.
Given our limited capacity, we may not be able to contain the virus as effectively again. Should we be prepared to go after short term gains at the greater risk of longer term catastrophic pain?
It is equally important that we adhere to MOH-recommended protocols more stringently. Increasingly, we are ignoring prudent COVID-19 protocols in public. More people are not wearing masks and not observing the six-foot social distancing rule. Also, many bars and restaurants are openly operating without regard to prudent COVID-19 guidelines.
We are returning to congregating in side streets for social or commercial purposes without masks and without social distancing because we are “COVID-19 free”. In that regard, neither the police nor the Ministry of Health, both of whom did close to excellent jobs in the first phase of COVID-19, seem to be actively involved in suppressing such trends.
Furthermore, the violators themselves are becoming belligerent when conscientious Grenadians point out their disregard for their fellow citizens’ rights to good health. What is needed is a new separate COVID-19 Police Force to monitor compliance so that publicly we can continue to manage the virus in 2021 as well as we did in 2020.
We should resist the temptation to celebrate prematurely: COVID-19 has no respect for any human being and it’s not done with us yet. That’s why we have to temper our “COVID-19 free” exuberance. If we don’t we will be undermining the good work done to date and could end up in an even worse position – health-wise and economically – than we are in right now. Put more bluntly: it’s not worth the risk to open up prematurely or to behave irresponsibly.
Second, to re-load our economy we must lower our interest rates now. Reducing interest rates on loans will create a positive sea-change across our economy. By cutting loan rates to both existing and new borrowers, we will reduce the size of scheduled loan repayments. This would give borrowers a financial “break” – which the whole country urgently needs.
Why is this so important? First, with a few exceptions, most of us have much lower cash flow and more depressed disposable income now than we had before COVID-19. Without reductions in loan repayments, most borrowers will struggle to meet their regular obligations.
Many will default on their loans in 2021. This will put our financial system under stress. Lenders will be forced to write-off increasing amounts of loans that will go bad – reducing their profitability and operating performance.
Second, reducing interest rates could increase disposable income nationally – which could help to create stronger consumer demand in 2021. Third, lower interest rates will make construction and property purchases more attractive to borrowers – a sector of the economy that is a major stimulant to economic growth.
Fourth, lower lending rates will reduce the pressure for wage increases from unions, given that many of their members will end up with smaller cash outflows – especially those who are indebted to banks and credit unions.
Is this feasible? In recent years, the Barbados Central Bank eliminated the minimum interest rate requirement (on savings deposits) and allowed banks to compete for deposits on the basis of interest rates established by each bank. The result: mortgage rates dropped to about 4%, making borrowing much more affordable to the average Barbadian citizen.
In our case, Government will need to persuade the Eastern Caribbean Central Bank to eliminate the 2% minimum savings deposit rate. This has to happen to encourage our lenders to drop their own loan rates to Grenadian borrowers. On their own, our financial institutions are reluctant to drop interest rates today – even when faced with growing repayment challenges by their borrowers.
Instead, they are offering other deferral options –such as extending loan repayment terms. While this means that loan repayments will go down it also means that total repayments are going to be much greater than agreed at the time the loans were granted.
Other initiatives can help boost our economy. One thing we could do is to open up our property market. Our real estate brokers confirm that there is now strong demand for property purchases by Grenadians living abroad. But not everyone wants a house, which can be expensive and requires full-time management.
However, our legal system does not allow for the purchase and sale of apartments. When we do establish such a law, its net effect will be to create a new sector in our economy. That sector would be driven by an expansion in residences – part time or permanent – owned by people who now live outside Grenada. They would be then motivated to visit Grenada regularly and to engage in multi-faceted economic activity e.g. renting cars, eating at restaurants, buying gas for their vehicles, shopping at the supermarkets, etc.
Such a strategy would fit well with the current massive over-supply of apartments targeted at SGU students – most of whom are unlikely to return to Grenada in January 2021. It will also create new investment opportunities that could come from our new apartment-owning residents. Finally, such a law would also make it much affordable for young Grenadians to buy apartments as starter homes – as is done regularly in Jamaica.
I acknowledge that, via the CBI programme, some apartment complexes are offering units for sale under the Condominium Act. But that is not the same thing as across-the-board laws that would allow Grenadians to buy and sell apartments to other Grenadians and expatriates without being part of the CBI programme.
We can get through 2021 successfully if we are more cautious, behave more responsibly, and lower our interest rates. Acting now will be beneficial and won’t cost our Government any money. But continuing to ignore risks and realities can have untold health and economic consequences that could impair our ability to recover next year.
Michael Julien is a financial economist. He has worked on development issues in Africa, the Caribbean, the Middle East, Eastern Europe and Central America. Mr. Julien was trained in Grenada, London, Montreal, Boston, Rotterdam, Madrid and San Diego. He holds a Master’s Degree in Strategic Design and a Master’s Degree in Economic Development