As geopolitical tensions continue to rise in the Middle East, economist Jeremy Stephen has issued a stark warning about the potential repercussions for the Barbados economy.
His concerns centre on the possible resurgence of logistical issues and inflation which could significantly impact the cost of living in the country.
He argued that these escalating issues, despite not involving direct United States participation, created a scenario akin to a world war, with multiple nations embroiled in conflicts that could have far-reaching economic impacts.
“In Jordan, right now and Lebanon, there has been some increased instability. In addition, there is Israel’s unwillingness to ease their tensions with Palestine back to, let’s say, a pre-COVID level, or at least during the ten years going into COVID. Russia is still trying to gain ground in the Ukraine. On top of that, there’s increasing tensions in the South, the Asian South Seas as well. I am of the view that we’re in the middle of a World War III right now,” Stephen explained.
“Essentially, there are too many countries involved in escalating issues for it not to be viewed as a world war. So, it essentially means one of two things: that the issues that we had during COVID with logistics may begin to rear their heads again,” he added.
The former UWI banking and finance lecturer pointed out that during the COVID-19 pandemic, Barbadian distributors and importers had to source products from alternative markets, such as Turkey, due to logistical disruptions in the US and Europe. This stopgap measure proved effective at the time, but renewed conflicts in the Middle East could jeopardise these supply lines.
Product issue
“If the Middle East deepens into war, a lot of the products that we sourced in the Caribbean as a stopgap measure might have issues getting here in a timely manner. If it’s not timely, therefore, it may not be cost-effective,” Stephen noted. “You can expect, at least in the Caribbean, probably an escalation of inflation again.”
Minister of Foreign Affairs Kerrie Symmonds also expressed significant concern over the potential impact these developments could have on Barbados. Symmonds highlighted the numerous conflict zones and geopolitical struggles currently unfolding worldwide and urged Barbadians to prepare for potential economic repercussions.
“These are areas where there are military-type struggles taking place. Obviously, there is a point at which the global economy as a whole is going to start to feel the pain,” Symmonds said. He emphasised the enduring nature of these conflicts, particularly highlighting the ongoing crisis in Gaza with Israel and Palestine and the protracted war between Ukraine and Russia.
Economic performance
Emphasising the importance of focusing on domestic economic performance and maintaining vigilance, Symmonds cautioned: “We are not out of the woods and we have to pay very close attention to our domestic economic performance and continue not to just rejoice in the growth
that we have achieved, but to continue to redouble our efforts to make sure that we can be in a position of relative safety.”
Fuel prices are another area of concern, given the Caribbean’s indirect reliance on fuel prices influenced by Middle Eastern dynamics. Stephen warned that deepening tensions could lead to increased fuel prices, subsequently driving up transportation and electricity costs.
“Given that the majority of our vehicles still use fuel and our homes are still connected to the grid, you can expect that this may result in pressure on Light and Power or Emira to raise or to adjust for the fuel clause, which means paying more on light bills, if these tensions deepen in the Middle East,” he explained.
Ripple effect
Additionally, Stephen emphasised that logistical issues stemming from the Middle East conflict could ripple out to other regions, including South Africa, impacting the availability and cost of various goods.
While the immediate impact on tourism remains uncertain, Stephen suggested that ongoing riots and economic policies in the United Kingdom could influence the upcoming tourist season. He stressed the need for vigilance and adaptive measures to mitigate potential economic disruptions.
“In the near term, even with these riots in the UK, I don’t think it damages the tourism product this year, given how close to the season it is. People will want to escape, although there’s a likelihood that the riots may result in damage to property. If you are seeing further or deeper damages in property, particularly business property in the UK, maybe you might not get as many people as you thought you would. But at this time, it’s still a little too close to call,” Stephen remarked.
He added that the response of the UK’s new Labour government could also play a significant role in determining the extent of economic impacts. Expansionary policies aimed at improving economic relations with the EU and mitigating Brexit’s effects could bolster spending and reduce negative outlooks, he suggested. (CLM)
