The Governor of the Reserve Bank of Vanuatu has warned people need to be cautious with their money as COVID-19 continues to spread and Vanuatu and global economic recovery looks further away than first thought.

“We have to spend now with care, try to save some money, we don’t know what will happen ahead but we are in for a long haul,” said Reserve Bank Governor Simeon Athy.

A quick economic recovery rests on the hope of the discovery of a COVID-19 vaccine, Mr Athy said.

International experts say a vaccine could be 18 months or two years away, or even more.

Until then, Mr Athy said, small island states like Vanuatu should prepare for increased economic impacts.

“This is a very sad situation and everybody is facing it around the world,” he said.

Before COVID-19 hit, Vanuatu was expecting economic growth in 2020 to be 3.8 per cent.

Latest figures released by the International Monetary Fund show a dramatic downward shift with the economy now expected to shrink by 3.3 per cent.

Unless tourism and trade get back to full operation, contraction of the economy will continue, Governor Athy warned.

The bank’s Macroeconomic Committee should now be looking at where the new GDP focus will be, he said.

“This will help point a direction for authorities to take measures in countering the [COVID-19] impacts.

Airlines and airports struggle

Tourism has been one of the hardest hit industries so organisations such as Airports Vanuatu Ltd have seen a big drop in revenue. But the company believes they still need to continue spending to maintain their operations.

CEO of Airports Vanuatu Limited said support from the Government is very important to maintain current operations.

“We still need some level of cost to keep the airports operation running and cover its maintenance, so that is where the biggest impact comes from, and we are happy to be having conversations with the Government to receive some support,” said the company’s CEO Jason Rakau.

The CEO of the Association of South Pacific Airlines, George Faktaufon, said a return to full aircraft operation is now not expected until at least July 2021.

“We have to move the timeline back because there is unlikely to be any opening of borders in the third or fourth quarters of this year,” Mr Faktaufon said.

Mr Faktaufon warned with costs such as aircraft leases continuing and little revenue coming in there is a real risk some airlines will go under before borders re-open.

Uncertainty about when travel will resume is worrying airlines.

“We need to work backwards on how we can best prepare our people to be ready to fly by July 2021,” he said.

“So we need at least three months for the process to take place and mainly do training for our pilots and engineers and get our aircraft airworthiness [up to standard],” Mr Faktaufon said.