Answer to Question #211387 in Macroeconomics for Catherine Melita

Question

List the key trade policy challenges for Small Developing Island States (SIDS) in the present context of COVID-19? Suggest how these could be dealt with.

Answer 1

1. demand and supply-side shocks

Due to Covid-19 small and vulnerable economies are hit hard because of their dependence on trade as a driver of economic growth, their small domestic markets and low levels of diversification, all of which increase their vulnerability to external shocks.

2) Investment barriers

The Covid-19 disease has actually discouraged investors from Small Developing Island States to invest their capital in other countries especially where the pandemic has widely spread.The current situation offers opportunities for SIDS to rapidly adopt digital platforms, enhance their digital capabilities(digitization of value chain actors, e-payments, Big Data analytics) and strengthen island and inter-island communication networks.

3) Rising tariffs

The rising tariffs have increased the price of essential commodities. Additionally the price of importing goods has also increased which has discouraged a number of business people from importing such goods. The government should regulate all this by implementing a policy that no one should raise the price of goods or services at a time when the population is finding ways to cope with the pandemic.