The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas suffered a 25.9 percent year-over-year contraction in its 2020 first quarter services exports as the COVID-19 pandemic took hold, it was revealed yesterday.

The Inter-American Development Bank's (IDB) Trade and Integration Monitor disclosed that output from the Bahamian economy's key sector, which includes both tourism and financial services, shrank by more than one-quarter compared to the same period in 2019.

Highlighting the devastation inflicted by the pandemic, which increasingly tightened its grip in March, the IDB document said the 2020 first quarter performance contrasted sharply with the 14.6 percent and 4.6 percent annual growth rates recorded for 2018 and 2019. Services exports in those two years totalled $3.7bn and $3.9bn, respectively.

The IDB report did not break these figures down by industry, although it also documented a 28.4 percent increase in The Bahamas' export of physical goods during the 2019 calendar yea - again something that was not explained.

That followed 10.8 percent growth in 2018, with the value of The Bahamas' physical goods exports pegged at $500m for that year and at $700m in 2019. Physical goods imports to The Bahamas in 2019, meanwhile, were said to have declined by 5.9 percent in 2019 to $3.3bn as opposed to $3.5bn in the prior year, when they grew by 1.3 percent.

The IDB said the value of exports from Latin America and the Caribbean contracted more than global trade, which dropped by 13.3 percent year-on-year in the first half of 2020.

The pandemic affected international trade in services more severely than trade in goods. Service exports from Latin America and the Caribbean entered negative ground for the first time since 2015, contracting by an estimated rate of 29.5 percent year-on-year in the 2020 first half.

“So far, the trade shock has been less intense than was initially predicted, and we are beginning to see some signs of recovery. However, new outbreaks and lockdown measures may affect the recovery of global trade, which had already weakened even before the health crisis hit,” said Paolo Giordano, principal economist at the IDB’s integration and trade sector, which coordinated the report.

Latin America and the Caribbean’s trade performance was particularly affected in the first half of 2020 by the downturn in exports to large markets such as the US (-19.5 percent), the European Union (-18.6 percent), and China (-1 percent).

However, the drop in intraregional trade was sharper. These flows fell by -30.3 percent in the Andean Community, -24.6 percent in MERCOSUR, -24 percent in the Pacific Alliance, and -8.8 percent in Central America and the Dominican Republic. As a result, the share of intraregional flows in total trade from Latin America and the Caribbean continued to shrink, coming to account for just 12.8 percent of the total.

Although the downturn affected the entire region, it was felt the most in Mexico and the South American energy-exporting countries, largely in response to oil prices, which plummeted by 29.2 percent between January and August 2020.

Imports from Latin America and the Caribbean fell 17.1 percent year-on-year in the first half of 2020, mainly impacting Mexico (-19.5 percent), Central America (-17.4 percent), and South America (-15 percent).

The IDB report urged countries to adopt an ambitious international integration agenda and consolidate regional value chains to attract new investments and take advantage of nearshoring opportunities in both goods and services.

It added that priorities should include strengthening export promotion and investment attraction agencies, improving trade facilitation and modernising Customs facilities, diversifying the services sectors, and promoting trade digitalisation.

The IDB report added that pragmatic initiatives to reduce transportation costs will be critical if Latin American and Caribbean economies hope to compete in future global production networks. It recommended strengthening regional integration and co-operation initiatives to ensure the region’s economies are operating in an efficient, reliable regulatory space that is attractive for investors.