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- ON THE LEFT: Standards make the world of difference Read More
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- WHAT MATTERS MOST: Growing private sector the key Read More
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NOW THAT THE GENERAL ELECTION is clearly in the air, the major political parties will be forced to present to the public their ideas for growing and transforming the local economy over the next five years. Those ideas cannot be general in nature. Instead, specific policies, plans and programmes have to be placed on the agenda for the public to scrutinise. Already, we have heard some ideas from the Democratic Labour Party as well as the Barbados Labour Party and more details are sure to be released in the coming weeks. And the timing couldn’t be more crucial. The Central Bank of Barbados review of the economy for the first nine months of 2012 suggests to me that serious policy interventions are urgently needed not only to stimulate economic activity but also reconfigure the economic landscape of this country. That is so because the weaknesses in the economy are clear to see. Indeed, the review reminds me of Red Plastic Bag’s declaration that “the country is sick, the country ain’t well”. Why? In terms of the overall performance during the first nine months of the year, the economy has been described as “stagnant”. That characterization is a reflection of the weak performances of the agriculture, manufacturing and tourism industries. Even though there has been some expansion in activities in construction, international business and financial services, the performances of those sectors were not sufficient to allow the economy to record any significant growth. It is not surprising, therefore, that inflation fell slightly while the rate of unemployment increased marginally. Given the weak performance of the economy, it would have been extremely difficult to imagine any significant improvement in the fiscal situation. And that indeed is borne out by the figures. According to the review, the fiscal deficit has increased because of a decline in current revenue and an increase in expenditure. Despite higher intake from property taxes, tax revenue, for example, has declined because of lower collections from both personal income taxes and VAT. On the expenditure side, the increase reflects higher outlays to cover interest payments and transfers to individuals. The weak performance of the economy is also reflected on the external side, particularly in relation to capital inflows. The review points to reduced capital inflows on both the private and public sides, resulting in a loss of international reserves. On the current side of the balance of payments, though, the news is a bit more positive as lower domestic demand led to an improvement in the deficit on the current account as imports of consumer and capital goods fell. As for the rest of 2012, the economy is expected to grow only marginally, assuming that construction continues to perform well and “provided the winter tourist season does not disappoint.” Clearly, the local economy is suffering mostly from a lack of economic growth and development. To achieve any significant growth rate, some stimulus is needed. That stimulus has to be provided, for example, through incentives to boost the productive sectors of the economy, increase consumer spending, attract foreign direct investment, and raise the level of international competitiveness of local products and services. Failure to implement such strategies would only serve to keep the economy in a further state of depression!