OVER THE LAST YEAR, I have been justly critical of the Governor of the Central Bank of Barbados with respect to changes in the reporting of some economic statistics, the creation of his own unemployment data and some unfortunate comments about his institution’s capacity to forecast.
Let me now praise him for the new format to the section of the Economic Review which focuses on position papers on various topical issues affecting the economy. Some of the information that is not easily available to the public is very welcome, as well as the analysis.
The beauty in the position papers is the attempt to put an informed position in the public domain. However, though the paper may be informed it does not mean that it is the only perspective, which is as it should be.
Perhaps a forum needs to be found to present these papers to the public since they are more accessible, and may be more relevant, than the more sophisticated research papers. Â
The need for consistency in the reporting of economic statistics may not matter to the general public, but it does matter to trained economists as happened in 2010 when the Economic Review opted to report the country’s gross international reserves instead of the customary net international reserves. It matters because the reserves would have been reported as declining by almost $268 million rather than the $68 million for the first six months of 2010.
Contrary to what may be perceived by a few in our midst, no one is waiting for terrible economic data to parade on. Rather, the data help to verify or not verify the relationships in the economy. As a result, the ability to understand the economy and surely the ability to forecast are enhanced.
Indeed, the major problem with the Government’s Medium Term Fiscal Strategy document is its lack of a macroeconomic model from which the various relationships are derived. As a result, major changes to the numbers are inevitable. Better can be done!
A most unfortunate piece of reporting was the way in which the cost of Dodds prison was presented in 2010. Figures were quoted in a manner that gave the public the impression that it cost in excess of $700 million to build the facility. The reporting was deliberate in its intent without reference to the concept of the time value of money.
For example, is it fair to quote the total payments made on a 25-year mortgage on a home in determining its cost? If that is not fair, why do it for Dodds prison? It simply sends a political message.
Given the recent history of the Barbados economy and Caribbean economies in general, it is impossible for any trained economist to justify the current fiscal condition of the Barbados Government. It is also impossible to justify the size of the country’s debt, though it is fortunate that the domestic component is as large as it is.
Research or position papers that seek to suggest that the country’s current fiscal position is sustainable simply because of the existing stock of foreign reserves are farcical.
There are limits to the perspectives of the trained economist.
Perspectives such as these will affect the bank’s ability to forecast, in which case it may be better to go to a fortune teller. If truth be told, the economic profession has come a long way over the last three decades in terms of its capacity to forecast. The most important thing in forecasting is to first understand past behaviour.
In this regard, the local fraternity is better than it ever was.
A large part of becoming better is having access to better information.
It is therefore impossible for the Central Bank’s Governor to dismiss the figures of the Barbados Statistical Service and use his own figures collected via his alleged survey of 30 companies, the unemployment claims and discussions with the Barbados Employers Confederation and trade unions.
The time has come to get past framing the country in terms of recession, when it is not officially in a recession, and focus on information which speaks to economic recovery.
The international environment may be a political convenience for the Government, but it is not an economic holocaust for the people.
• Clyde Mascoll is an economist and Opposition Barbados Labour Party spokesman on the economy.
