Caribbean Development Bank (CDB) director of economics Dr Justin Ram. (Picture by Reco Moore.)
Barbados is in danger of having the region’s worst performing economy this year.
Predicting that the Barbados economy would grow by no more than 0.7 per cent in 2018, Caribbean Development Bank (CDB) director of economics Dr Justin Ram yesterday advised Government to take urgent action to reverse the slide.
He gave the island a five-point to-do list that included reducing debt and cutting spending. Ram also thinks current road and sewage problems suggested Government needed to reform how infrastructure was built and managed in Barbados.
The economist gave the advice yesterday as he forecast that after growing by one per cent last year, Barbados’ predicted marginal growth this year would be the worst of the CDB’s 19 borrowing member countries. This included countries affected by hurricanes last year.
Speaking at the bank’s annual Press conference at its Wildey, St Michael headquarters, the economist said: “The growth rate that we are predicting for 2018 is really because of the economic circumstances that there currently are in Barbados, primarily as it relates to the Government accounts, and also as it relates to some uncertainty for this year because we also have a pending election.”
Ram said “the first thing is that the Government needs to examine and to bring under control the cost of debt”.
“Right now the effective interest rate on debt is too high and so some debt management is required. Secondly, the Government also needs to examine its other expenditures and particularly as it relates to transfers and subsidies, which are currently running at around 13 per cent of GDP. So that means there needs to be some reforms, particularly at state-owned enterprises,” he explained.
He also advised Government to “make the Barbados economy a lot more competitive and productive so that means dealing with inefficiencies and the doing business environment”.
Ram continued: “Fourthly, throughout this process of reform it’s really important that the Government focuses social interventions towards those who need it and that also means that there needs to be a new training programme to provide labourers with the skills for the new labour market.”
Finally, he said “the Government needs to examine its infrastructure”.
“It needs to put in place a programme that reforms and replaces some of the infrastructure that we have now, particularly as it relates to roads and to sewage,” he added.
Ram also commented on the foreign exchange situation in the region. He said “improving fiscal balances can also have a positive impact on foreign exchange reserves” and noted that The Bahamas and Barbados were both reporting “foreign exchange reserves below the three-month import cover threshold”.
“For countries with fixed exchange rates, policymakers must monitor domestic inflation and competitiveness . . . . Drawing down reserves to maintain artificially high rates is unsustainable. Export competitiveness is critical for building reserves, and the real exchange rate is an important determinant of competitiveness,” Ram observed.
The CDB expects the regional economy to grow by two per cent this year compared with 0.6 per cent in 2017. This “will be driven mainly by the return to growth in Trinidad and Tobago and a 2.3 per cent uptick in Jamaica, which accounts for about a fifth of regional GDP”. (SC)