Two of PEP’s Resource Persons specialising in macro-micro policy modelling, Sébastien Mathouraparsad and Bernard Decaluwé, have published an article on the economic effects of COVID-19 containment measures in Guadeloupe.
In the article, Impact Économique Du Confinement en Guadeloupe : Un « Rété a Kaz a Zot » Nécessaire mais Potentiellement Récessif (see also the English translation: Economic Impact of Containment in Guadeloupe: A Necessary but Potentially Recessive “Rété a Kaz a Zot”), the authors use a macroeconomic simulation tool to estimate how the measures Guadeloupe is taking against the spread of COVID-19 will affect the country’s economy. Specifically, they measure the short-term effects of reduced activity, based on one month of containment.
The authors find that the loss of economic activity will generate a deterioration in household welfare and increase monetary poverty.
They identify key areas where the containment measures will have a significant impact, including:
- Consumers go to the markets less frequently
- Over-consumption of “priority” goods creating scarcity and lower demand for fresh (short-life) produce.
- Investment decreases as the construction sector suspends many activities.
- Tourist desert the country
- The supply of goods and services is shaken as some sectors shut down (e.g. hotel accommodation), some face reduced demand (e.g. transport), and some can expect increased publish spending (e.g. health).
- Productivity loss in the sectors that remain active
- Due to social distancing measures, work/family balance when schools are closed, and illness.
Looking to the future, the authors state that: “recovery will depend on the extent of the economic slowdown, its duration and the solvency of the government, which will be obliged to borrow and invest massively to stabilise the economy.”
They also identify factors that may help Guadeloupe’s economy rebound. Some companies are switching production to help the “war effort” (e.g. distilleries making hand sanitizer gel), there may be reduced production costs if fuel prices remain low, and consumers may be deferring non-priority purchases until the health crisis has passed.