During his maiden budget presentation, Premier Dr the Honourable Natalio Wheatley took time to reflect on the global circumstances, which economies, including that of the BVI must brace for the effects of.
To this end, the premier explored recent releases from institutions such as the World Bank, the World Economic Forum and the International Monetary Fund.
“In 2021, institutions such as the World Bank and the International Monetary Fund (IMF) forecasted that economies would begin to experience growth and recovery from the recession triggered by the COVID-19 Pandemic in 2022. The situation, however, would be better in the more developed economies that the developing ones, and global output would remain 2% below the pre-pandemic projections. The IMF was highly confident of 4.9% global growth in 2022.”, he said.
“But this was before the then-unforeseen Russia-Ukraine conflict escalated in February 2022. Given the broad ranging and deeply impactful implications of the war, it was inevitable that the outlook from the institutions would have to change”, he added.
Wheatley went on to reference the World Economic Forum’s Chief Economist’s outlook from September this year, which described the situation as “a time of significant economic danger”, citing persistent, surging inflation levels which have not been seen in a generation, freefall wages and increased human suffering among already present effects.
He said, “Governments worldwide have been placed in near impossible situations, because every response option comes with high cost and even higher risks. For instance, as the WEF points out, traditional approaches to rein in inflation risk triggering recession and a spike in unemployment. Fiscal support measures for struggling households risk adding to the levels of public borrowing which, for many countries, are already high after the outlays required by previous crises. Debt distress is at highly concerning levels in vulnerable countries, increasing their exposure to additional shocks, such as climate-related natural disasters and placing many in a vicious cycle of debt”, Wheatley said.”The deepening of geopolitical fissures, which continues to play out, is an accelerant to this bonfire, easily perceptible in the changes taking place with global supply chains. The WEF describes the months ahead as “uncharted waters”.”
In October 2022, the IMF’s World Economic Outlook forecasted that global growth would slow from 6.0% in 2021 to 3.2% in 2022, and 2.7% in 2023.
The IMF notes further, about a third of the world economy faces two consecutive quarters of negative growth, and global inflation is forecast to rise from 4.7% in 2021 to 8.8% in 2022, but to decline to 6.5% in 2023 and to 4.1% by 2024. A figure the premier notes as “still very high”.
Given the prevailing situation, Wheatley noted that Governments and people across the globe need to prepare for tough times. During which, they may need to distinguish between wants and needs, and even prioritise what is considered a need at times.
In regards to navigating these difficult times, the Premier noted that the IMF has made recommendations.
“The IMF has made some suggestions for how to survive these challenges in the long-run. These include intensifying structural reforms to improve productivity and economic capacity, and fast-tracking policies for the green energy transition to boost energy security and mitigate some of the costs associated with climate change”, he said.
“Being prepared and resilient tomorrow requires making the tough decisions and doing the work today. Perhaps the one consolation in crises is that challenges create the atmosphere for innovation. As people are confronted by problems, they find creative ways to overcome them. This is one of the strengths of the indomitable Virgin Islands people throughout our generations”, he added.
Wheatley said that the Virgin Islands needs to keep heed of what is happening in the wider world, in order to equip itself with the necessary education, training, technology and diversifying of the economy to remain ahead of the curve.