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Poverty warning - Inequality to rise, brakes to be put on globalisation, says Bernal

Published:Monday | April 20, 2020 | 12:20 AM
Richard Bernal
Richard Bernal

Edmond Campbell/Senior Staff Reporter

With economies across the globe being battered by the effects of the COVID-19 pandemic, Ambassador Richard Bernal says that Caribbean nations that are more vulnerable to external shocks can expect to see an increase in poverty and inequality in the short run.

Figures released by the Government last year showed that 19.3 per cent of Jamaicans were living below the poverty line in 2017.

Bernal, pro-vice chancellor of global affairs at The University of the West Indies, argued that those who are already disadvantaged and poor are going to feel the effects disproportionately across the globe.

The UWI pro-vice chancellor was among several presenters who participated yesterday in a teleconference at The UWI dubbed ‘COVID-19 – Approaching Code Red’.

Tourism, services, and entertainment have already been hit hard by the effects of the disease, and according to Bernal, there is going to be a spike in unemployment.

He noted that much of the employment in the region is in the informal sector, which depends heavily on expenditure from the formal sector, which has also been impacted.

In terms of the global economic outlook, the International Monetary Fund (IMF) and the World Bank have already forecast significant losses in the first quarter, indicating that this is likely to intensify in the second.

The global economy is expected to contract between three and five per cent - the IMF estimates that Jamaica’s will shrink by 5.6 per cent - but Bernal cautioned that the situation might be worse, depending on how slowly countries rebound from the pandemic.

In the United States, the world’s largest economy, 22 million people have already applied for unemployment benefits as a result of the fallout.

COVID-19 has already caused a major impact on the government’s fiscal budget, with the reallocation of resources to deal with the pandemic. Ten billion dollars has been allocated to help struggling businesses and laid-off workers, but Finance Minister Dr Nigel Clarke has hinted that the scale of economic displacement could overextend the current contingencies.

Bernal said the Government would be forced to resort to borrowing, a move Clarke has already announced. The finance minister has said that the Government would be seeking to borrow US$500 million from the IMF.

The ambassadoor reasoned that borrowing from the multilaterals to tackle COVID-19 would exacerbate the debt crisis in the Caribbean.

“Debt has to be paid for, and even if there is debt forgiveness, debt restructuring, refinancing, there is still going to be a lot of increase in debt given that the Caribbean countries were already among the most heavily indebted countries in the world,” he pointed out.

Bernal also argued that there would be pushback against globalisation and a repatriation of manufacturing and agricultural production.

“Countries are going to realise the cheapness or availability of imports is not the only consideration and that domestic production also is important to the security and resilience of their economy.

“So some of that premature deindustrialisation, which has been taking place in the Caribbean, is going to be halted as we bring back, onshore, some economic activities which were relinquished,” Bernal asserted.

He also urged Jamaicans to find opportunities in the midst of the crisis, tapping innovation and new streams of entrepreneurship.

edmond.campbell@gleanerjm.com