As world financial markets slumped yesterday amid the outbreak of covid-19 (coronavirus), a local finance expert yesterday questioned how prepared The Bahamas is to manage the risk of a possible pandemic.
Accountant and banker Hubert Edwards, who is also the founder of Success Summit, said significant weather events such as Hurricane Dorian or global health incidents such as the coronavirus can bring about a new perspective on risk management.
“As we watch China grapple with this health incident and other areas of the world, it is becoming clear that collectively the world may not be prepared for this. But look at the how it may impact vulnerable economies. One infected crew member or a passenger on a cruise ship will disrupt a normal port call, removing anticipated revenue, impacting local business and reducing government revenue,” Edwards said.
“Imagine therefore a broader-scale state of infection, affecting that entire industry.”
Edwards said while climate resilience has become a known risk factor for developing nations like The Bahamas, the rapid spread of coronavirus could strike an “almost clinical blow to the foundation of global commerce, strategies and investments”, bringing financial risk to the region.
“The connectivity of the global financial systems can cause one weakened market to have a contagion like effect on others. China challenges are impacting projections, consumer spending will change, restriction on the fluidity of movement amongst people will impact commerce, negotiations and planning will be delayed,” he said.
“The net effect is that the spillover from one economy to the next will carry adverse results. Suppliers will see lower demand and capital will shift for safety. So, the domino which is China (for the moment) has knocked the U.S. financial markets, seeing the Dow losing significant value in a short period. But Europe is also nervous and all the markets served by and consumed by China are at risk.”
Edwards questioned how prepared The Bahamas and the wider Caribbean are for the threat.
“How will a Bahamas be impacted if there is a big impact on its main trading partner, the United States? Consider also in the wake of losing a significant portion of its economy as a result of a climatic event, the country is faced with a potential unexpected precipitous fall in global economic growth. It’s a known fact that one of the important headwinds expected for 2020 is a slower growing world economy. Any significant shock could result in real problems for The Bahamas and other countries of the region,” he said.
“There are big, massive macro exposures and how we prepare for these as countries, as a region and collectively on the global stage will determine how effectively we manage our ever present tenuous vulnerabilities. This is mainly because of the high level of interdependence and interconnectivities with the rest of the world that is present in our day to day national lives.”