A new study conducted by the European Investment Bank (EIB) listed The Bahamas as one of only two high-income nations with the highest vulnerability on its COVID-19 economic vulnerability index.
The EIB has pledged more than £200 billion in the global effort to help people hit the hardest by the pandemic. Its index covers countries outside the European Union and helps give an idea of the regions that need the most help.
“Half of low-income countries and 25 percent of middle-income countries face the highest risk from COVID-19. Unsurprisingly, higher-income countries generally have better coping capacities, even when hit by an unprecedented global shock,” the report said.
“Of the countries with the highest vulnerability to the crisis, only two – Antigua and Barbuda and The Bahamas – are high-income. Nonetheless, 56 percent of high-income countries face an intermediate level of risk, along with 63 percent of middle-income economies and half of the poorest countries.”
The report outlined three categories of vulnerability: lowest, intermediate and highest.
The Bahamas was placed in the intermediate category for the overall COVID-19 economic vulnerability index, as well as for the categories of health system and demography, and banking sector strength.
The categories in which The Bahamas was listed as having the highest vulnerability were tourism, vulnerability to capital outflows and fiscal space.
The Bahamas was placed in the lowest vulnerability category for the areas of global chain values and commodity exports.
The vulnerability index examined three main factors that would influence the resilience of economies to the COVID-19 shock, including the quality of health care and age of the population, with its research finding that older societies and poorly functioning healthcare systems often make countries vulnerable to the health impacts of the pandemic; the structure of the economy; and a nation’s exposure and ability to respond to shocks.
“The shocks considered include the reversal of capital flows. Economies with large current account deficits not financed by foreign direct investments have to fund their remaining external financing needs through volatile capital flows, such as portfolio investment,” the EIB said.
“These flows have declined sharply, particularly in developing and emerging markets. Other variables include the ability of countries to implement countercyclical fiscal policies, the strength of the banking sector and its capacity to support the recovery from the crisis.”
Dependence on tourism revenue is a key driver of vulnerability among the Caribbean and Pacific countries with over two-thirds ranking among the most vulnerable, the EIB said.