The Big Push
Transforming the ECCU Together through Innovation and Collective Action
Key Messages
- The Big Push is a call for a decade of transformative actions that will double the GDP of the economies of the ECCU and elevate the quality of life of the people of Eastern Caribbean Currency Union (ECCU).
- Accelerating and sustaining growth in our region necessitates, inter alia, building resilience; human capital development; digital transformation; accelerating the renewable energy transition; and wealth creation through innovation and financial inclusion.
- The Big Push necessitates a shift in mindset, bold and courageous leadership and collective action.
In January 2023, during the launch of the Eastern Caribbean Central Bank’s (ECCB) 40th anniversary celebrations, a clarion call was issued to the Currency Union to commit to the next decade of collective, transformative action - The Big Push (Antoine, 2023). Member countries have been challenged to develop and implement strategies and policies to double ECCU GDP in ten years, growing the combined economy to an estimated $34 billion (in real terms).
The Past Four Decades: A Historical Perspective
Doubling the ECCU’s GDP is not unprecedented. From the establishment of the Currency Union, output is estimated to have doubled from $5 billion in 1983 to $10 billion around 1998. Although GDP has surpassed 1998 levels, it has plateaued around $17 billion, attributable to a combination of shocks and policy choices.
Figure 1: ECCU output has grown modestly over the last 40 years
Source: ECCB
Moreover, while the forty-year period registered a modest mean growth rate of 3.2 per cent (see Figure 1), each subsequent decade within that period has slowed (see Figure 2). During the 1980s, real growth was, on average, 6.0 per cent, buoyed by strong agriculture performance, supported by preferential trading arrangements with Europe. Since that decade, average growth has been below 3.0 per cent. A combination of factors has led to sluggish progress. The ECCU’s vulnerability to external economic shocks, natural disasters, and structural issues – such as limited diversification of the economy leading to heavy reliance on tourism and agriculture. High public debt and infrastructural deficits have also hindered sustainable growth. Furthermore, global financial crises and the slow pace of digital and technological integration have compounded these challenges, limiting the region’s ability to fully capitalise on emerging economic opportunities.
Figure 2: Average real growth (%) of the ECCU by decade
Source: ECCB
What would doubling GDP mean for the Currency Union?
GDP measures the total value of goods and services produced within a country’s borders in a year. Notwithstanding the well-known limitations of using GDP as a measure of prosperity, doubling GDP would be a useful indicator of increased income levels and overall standard of living of ECCU households. A significant aim is to close the wealth gap between the ECCU and the United States of America (USA) – our largest trading partner and to whom the EC dollar is pegged. In 1983, per capita income in the USA was approximately US$30,000 (US Bureau of Economic Analysis), compared to the ECCU’s US$3,600 (12 per cent of USA’s). Today, per capita income in the USA is approximately US$60,000 (US Bureau of Economic Analysis), while the ECCU’s is approximately US$9,000 (15 per cent of USA’s). The goal over the next decade is to converge faster to US per capita income through inclusive socio-economic actions. The call for doubling of GDP is not an end itself. It is merely a tool for an engaged conversation and commitment to what could be and should be in the ECCU. Without careful design and deployment, we could achieve this moonshot goal and discover economic inequality has merely widened without little or no discernible impact on the quality of life for the people of the ECCU. That would be both a travesty and a tragedy. Ultimately, it is far more than an economic metric for it envisions the enlargement of possibilities and opportunities for the people of the ECCU especially our youth.
The Theatres of Accelerated Growth
What would it take to double ECCU GDP over the next ten years?
Economic simulations suggest that to double GDP in a decade, the ECCU needs a sustained real growth of 7.0 per cent per annum (See Figure 1 above), more than double the historic average real growth of 3.2 per cent. This necessitates strategic, transformative policies and initiatives to address structural impediments, and a willingness to explore new opportunities.
Resilience: An in-built Mechanism
An indispensable key to moving past the current output plateau is building resilience. The ECCU is one of the world’s most vulnerable regions due to its geographic location. Over the past forty years, our region has experienced many significant natural disasters. Countries have repeatedly been caught in cycles of huge reconstruction efforts following devastating events, resulting in a “see-saw” growth syndrome. The International Monetary Fund, in a 2018 report titled, “Bracing for the Storm,” estimates that disaster damage, as a ratio of GDP, is 4.5 times greater for small states than larger states, but six times higher for countries in the Caribbean. Additionally, the Caribbean “is 7 times more likely to be hit by natural disasters than larger states and twice as likely as other small states” (Ötker & Srinivasan, 2018, p. 49). The costs of these disasters have been substantial and estimated to be billions of US dollars, with singular events at times exceeding the size of a country’s economy – Grenada (Hurricane Ivan, 2004) and the Commonwealth of Dominica (Hurricane Maria, 2017).
The region is increasingly vulnerable to extreme events, which are becoming more frequent and intense due to climate change. To ensure that our economies can bounce forward after an event, comprehensive strategies that enhance resilience are required.
Figure 3: Major Disruptive Natural Events by Year for ECCU Members[i]
Sources: Emergency Events Database (EM-DAT/CRED), ECCB
Infrastructural resilience is critical, likewise fiscal and human resilience. This includes in-built fiscal buffers for climate and disaster risks, strengthening preparedness mechanisms, promoting sustainable development practices and ensuring that citizens have the necessary capacity to withstand and rebound from such events.
Energy Revolution
About 90 per cent of the region’s energy needs are powered by fossil fuels, which currently constitute approximately 19 per cent of our import bill. Consequently, the ECCU’s balance of payments are often affected by swings in the volatile international oil market. We cannot transform the region without addressing these high energy costs, which can deter investments in energy-intensive sectors and lead to lower competitiveness. High costs can also disproportionately affect low-income households, who spend a larger share of their income on energy.
It is imperative, in the push for elevated and sustainable economic growth, to prioritise renewable energy technologies. The aim is tripling renewable energy penetration over a decade. While attainable, it requires significant upfront capital and transition costs. Regional governments must review and establish conducive regulatory environments that encourage investments in renewables. The ECCB-World Bank Renewable Energy Infrastructure Investment Facility seeks to support the transition.
Keys to Wealth Creation
- Innovation
There is a strong correlation between innovation and economic prosperity. East Asia, for example, has over the last half century, altered its trajectory by creating the world’s biggest science and technology innovation clusters, which have been largely credited for its sustained economic growth and the significant turnaround in the standard of living among its population. In the latest World Intellectual Property Organisation’s Global Innovation Index (GII) 2023, the top five most innovative countries - Switzerland, Sweden, the United States, the United Kingdom and Singapore - are all nations experiencing economic prosperity and high standards of living.
The only Caribbean countries which ranked in the 2023 GII were Jamaica and Trinidad, ranked 78 and 102, respectively. The ECCU countries were not ranked. Introspection submits that the region lags in various dimensions of the innovation index. These include R&D; financing for startups, scale ups and venture capital investments; access and use of ICT services; knowledge creation through patents, utility models, scientific and technical articles as well as knowledge impact and diffusion. Needless to say, this is not for the lack of brilliant regional creators and innovators.
The regional approach to innovation must be intentional, and not left to chance. This may include setting up institutions to support the creative process, offering tax incentives for private sector research and development, improving access to finance for entrepreneurs and collaborating with regional tertiary education institutions to create and diffuse knowledge.
- Financial Inclusion
Financial inclusion is the other source of wealth empowerment. This means that citizens have knowledge and access to affordable financial products that meet their needs. Over the next decade, ECCU citizens must have access to financial instruments that facilitate wealth creation. One such pathway is investing in the regional securities markets. Presently, only 1 in 25 persons (4 per cent) in the ECCU invest in the Eastern Caribbean Securities Market, compared with 3 in 5 (60 per cent) in the US stock market. ECCU citizens face barriers when accessing investment opportunities. These include limited capital, financial knowledge, and exposure to investment opportunities. The thrust is to have at least 1 in 5 persons invested in the regional capital market over the next decade, through information dissemination and policies that reduce costs and other barriers. The recent step by our governments to earmark a proportion of all government securities for retail investors and to lower the access threshold from $5,000 to $500 are welcome steps in that regard.
- Digital Transformation
We are in the golden age of artificial intelligence (AI), supercomputing, automation, and deep science innovation. While technology adoption is growing rapidly globally, estimates indicate that only about 60 per cent of our people are connected. The lack of connectivity means that not everyone can participate fully in the expanding digital economy. Accelerating digital integration is essential. Digital integration enhances economic efficiency, competitiveness, and resilience by enabling seamless access to global markets, improving financial inclusion, and fostering innovation. Using digital technologies, the ECCU can streamline government services, boost productivity in key sectors, and attract foreign investment through improved business environments. Furthermore, digital integration supports the development of a knowledge-based economy, empowers entrepreneurs, and addresses disparities by providing equal access to opportunities across member states.
Conclusion: A Call to Action
The Big Push is about transformation.
Transformation requires a mix of the right mind-sets, skill-sets and policy sets accompanied by strategic actions and essential investments. It also necessitates bold and courageous leadership and collective action with accountability for all partners engaged in this enterprise.
We must bolster our human capital, deliver an energy revolution and harness innovation through digital transformation all the while leveraging our greatest assets – our people (at home and in the diaspora) and our natural environment.
Who’s in?
I mean, all in.
Great. Let us do it. Now.
Acknowledgement
The ECCB acknowledges the contribution of Ms Nalisa Marieatte, Policy Analyst, Advisory Services in the preparation of content for this blog.
About the Author
Timothy N.J. Antoine has been the Governor of the ECCB since February 2016. He is passionate about the socio-economic transformation of the Eastern Caribbean Currency Union (ECCU) and is a strong advocate for regional cooperation and collective action. Indeed, he regards them as critical enablers to shared prosperity for the people of the ECCU.
About the Eastern Caribbean Central Bank
The Eastern Caribbean Central Bank (ECCB) was established in October 1983. The ECCB is the Monetary Authority for: Anguilla, Antigua and Barbuda, Commonwealth of Dominica, Grenada, Montserrat, Saint Christopher (St Kitts) and Nevis, Saint Lucia and Saint Vincent and the Grenadines.
Bibliography
Antoine, T.N.J. (2023). Opening remarks at launch of the ECCB’s 40th anniversary celebrations. Retrieved from https://www.eccb-centralbank.org/publications/timothy-n-j-antoine
Emergency Events Database (EM-DAT/CRED)/ UCLouvain (2024). Brussels, Belgium.
Ötker, I., & Srinivasan, K. (2018). Bracing for the Storm: For the Caribbean, building resilience is a matter of survival. Finance & Development, 0055(001), A014. Retrieved May 31, 2024, from https://doi.org/10.5089/9781484343418.022.A014
U.S. Bureau of Economic Analysis (2024). Real gross domestic product per capita [A939RX0Q048SBEA], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/A939RX0Q048SBEA, May 21, 2024.
World Intellectual Property Organization (WIPO). (2023). Global
Innovation Index 2023: Innovation in the face of Uncertainty. Geneva: WIPO. DOI:10.34667/tind.48220
[i] Disruptive Events, as defined by EM-DAT, meet at least one of the following criteria: (a) at least ten deaths (including dead and missing); (b) at least 100 people affected; and/or (c) a call for international assistance or an emergency declaration. In some years, the ECCU countries experienced more than 1 disruptive event. In that case, the most significant event was highlighted for that year.
