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360° Resilience : A Guide to Prepare the Caribbean for a New Generation of Shocks – Private and Financial Sector Resilience in the Caribbean (English)

The private sector in the Caribbean is crucial for economic growth and job creation and economic resilience is thus heavily determined by the shock absorbing capacity of individual firms and households. The focus of the analysis is on the private sector’s vulnerability to tropical storms, the type of disaster most prevalent in the region, but the discussion of risks and vulnerabilities is also more broadly applied to other types of shocks, such as the Coronavirus disease 2019 (COVID-19) pandemic. By linking sectoral vulnerabilities with the importance of a certain sector for economic activity, it builds a new country-level index for economic vulnerability. The chapter assesses the resilience of the financial sector by focusing on its exposure to economic sectors vulnerable to disasters and looking at the financial sector’s soundness to gauge its shock absorbing capacity. Results show that banks, the dominant type of financial institutions in most Caribbean countries, are particularly exposed through personal loans and any shock that impacts the household sector’s debt repayment capacity will thus be particularly severe. The chapter also builds an index of financial sector vulnerability to natural disasters by linking lending data at the sectoral level with the sectoral disaster vulnerabilities. The results highlight that banking sectors with high lending exposure to hotels and restaurants as well as the mining sector are particularly vulnerable. Based on the diagnostic and assessment of vulnerabilities, the last section of the chapter presents six areas to strengthen private and financial sector resilience. These areas include: (i) fostering economic diversification through digitization, (ii) expanding insurance coverage and instrument range for the private sector, (iii) improving the business environment and access to credit, (iv) reducing financial sector vulnerabilities, (v) strengthening financial sector safety nets, and (vi) ensure payment systems continuity.

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Citation

Masetti,Oliver

360° Resilience : A Guide to Prepare the Caribbean for a New Generation of Shocks – Private and Financial Sector Resilience in the Caribbean (English). Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/482781635296736297/360-Resilience-A-Guide-to-Prepare-the-Caribbean-for-a-New-Generation-of-Shocks-Private-and-Financial-Sector-Resilience-in-the-Caribbean