Diversification is key for tourism

IAN DURANT, Economist at the Caribbean Development Bank (CDB), has highlighted, once again, that one of the critical areas to enhance growth in the tourism sector is through diversification of source markets.

In the CDB report of the performance for 2013 and outlook for 2014, it highlighted that goods-based economies outperformed service-oriented economies of our region. Most of the growth was led by Guyana, Haiti and Suriname and to some extent Trinidad and Tobago, although the growth rate of the latter was not as high as the others.

In the tourism sector, stay-over arrivals increased across nations, as the recovery in key US and Euro Area markets continued. The exceptions were Antigua and Barbuda, The Bahamas, Barbados, Dominica, Grenada and St. Vincent and the Grenadines, where airlift challenges and high intra-regional travel cost affected visitor arrivals, the CDB report said.

“Due to the fact we have lower tourism arrivals and lower tourism receipts, there have been a knock-on effect of the fiscal performance of many of our countries,” Durant explained.

He said that diversification is important, because if “you look at the projected growth of Brazil (no traditional source markets), you have a situation where projected outbound tourist travel for Brazil is around six per cent”.

However, Durant stated that the Caribbean also needs to encourage diversification by improving the cost of doing business.

“One of the challenges we face ... we are not saving enough finance on our own, so you have a situation where investment is based on the inflow of external capital. In a situation where there is a sudden stop as a result of some international shock, then countries are forced to adjust because of the vulnerability of their economies,” he said.

Carl Howell, Chief Economist (Ag.) at the Caribbean Development Bank, said that Foreign Direct Investment (FDI) will return to the Caribbean.

“In the Caribbean, we are starting to see a rebound of FDI, for example in Jamaica and Grenada. My forecast is if the region continues to settle down and the fiscal adjustment continues, one can expect to see overtime a gradual improvement of FDI to the region,” he added. (NB)