By KRYSTEL ROLLE

Guardian Staff Reporter

krystel@nasguard.com

Central America and the Caribbean will be hit the hardest by the slowdown in tourism arrivals as a result of a global economic crisis, the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) has warned.

ECLAC, which contributes to the economic and social development of Latin America and the Caribbean, also warned that various governments in the Caribbean will be doubly challenged to maintain a stable economy.

About 75 percent of tourists to the English-speaking Caribbean with The Bahamas included, over 40 percent of those visiting Central America, and more than 75 percent of tourists to Cuba and the Dominican Republic come from developed economies in recession, according to the Preliminary Overview of the Economies of Latin America and the Caribbean 2008, which was published by ECLAC in December. Predictions regarding the potential impact of a slowdown in tourism have been made in recent months. Most recently, leading international credit rating agency Standard & Poor's (S&P), in its report on The Bahamas, noted that the effects of the slowdown of the U.S. economy are being felt across all sectors of the Bahamian economy, especially tourism, construction and retail.

"The Bahamas' tourism outlook for 2009 is bleak," S&P added.

ECLAC's report noted that in the first eight months of 2008, the arrival of tourists to Central America and South America continued rising by 9.4 percent and 7.2 percent, respectively. However, it said, in the Caribbean it grew only by three percent.

"Between June and August, demand for tourism services in the Caribbean has come to a standstill due to the lower number of visitors to The Bahamas, Barbados, Bermuda and Puerto Rico, four destinations visited mainly by United States and European travellers. In Mexico, arrivals increased 4.8 percent during the same period, followed by a drop in the flow of tourists," ECLAC said.

The report said lower inflation and currency depreciation could partially counteract the impact of regional tourism. It added that competitive prices may also help Caribbean countries to sustain tourism.

ECLAC added that growth projections for 2009 are much lower than 2008.

It suggested that the governments of the region should make every effort to deploy policies in order to prevent a deepening of the economic crisis.

It said the growth rate for Latin America and the Caribbean is projected to be 1.9 percent in 2009. However, it noted that that projection is based on a "relatively optimistic scenario."

The report added that the unemployment rate is also likely to rise further in 2009 – a prediction which many local officials have made in recent times. S&P also said unemployment could rise to 13 percent in The Bahamas this year. Financial analyst Greg Bethel recently told the media that he expected further layoffs in 2009.

In the past three months over 1,200 workers were laid off in the tourism industry. Bethel said he expects that more layoffs will follow in the retail and sales industry also.

ECLAC said the deterioration of labour-market indicators and the decline in remittances will have a negative impact on income distribution in the region.

"Under current circumstances, this means that public policy makers will face the double challenge of implementing countercyclical measures to stabilize economic growth and of developing instruments to shield the most vulnerable sectors of the population from the effects of the crisis," the report said.

Already the Bahamian government has increased its social services program, it has announced its plans to establish an unemployment benefits program, and it has cut taxes on a variety of products to allow for cheaper sales.

The government also plans to fast track a number of capital projects in an effort to stimulate the economy.