by TONY BEST

ALTHOUGH there aren't any signs of major economic troubles on the horizon, Barbados' way forward "isn't going to be easy".

Still, according to Richard Francis, the analyst who monitors Barbados' economy for Standard & Poor's in New York, there is no need to be glum about the prospects for this country.

Wall Street has sounded a caution as Barbados seeks to grapple with a growing fiscal deficit at a time of escalating oil prices, a weak United States economy and a possible slowdown in Britain, the source of much of the island's tourists.

However, a consolation is that the David Thompson administration has so far made the right moves since it took over the reins of office after the January 15 election.

Foreign reserves

Francis offered that assessment after the Central Bank issued its recent first quarter report that showed a surge in foreign reserves, growth around four per cent and some holding on the pace of inflation.

He said Bajans should expect the new Government to cut the level of its spending in a determined effort to lower the current account deficit.

"Obviously, last year was a good year and it looks as if the momentum has continued in the first quarter, which is good news," Francis told the SUNDAY SUN.

"We are expecting a slowdown throughout the rest of the year, mainly due to the weaker United States economy and possible recession. In addition, it appears that the UK is slowing as well.

"We expect a slowdown in Barbados, somewhere in the region of 2.5 to three per cent this year, which isn't so bad. It certainly wouldn't be as good as the past two or so," when the annual rate was around four per cent.

Strong economy

Francis, who believes the Government inherited a relatively strong economy, shared concerns of others about the deficit, the balance of payments picture and the level debt as articulated recently by Charlie Skeete, a former senior economic adviser at the Inter-American Development Bank.

But he was quick to say that Wall Street fully expects the new government to tackle those problems head on.

"Last year was an election year. We have a new Government. Indications are they intend to curb spending so that the fiscal deficit should go down – which would be prudent policy," he said.

"In terms of the current deficit that's going to be more difficult to handle because of the higher oil prices in Barbados and much of the rest of the Caribbean. That's going to continue to be a current concern," Francis said.

Indeed, when Thompson, Minister of State in the Ministry of Finance, Darcy Boyce, Governor of the Central Bank, Dr Marion Williams, and other top members of the administration's economic team visited New York last month, S&P and Moody's, the other major credit rating firm, cited both the deficit and the level of debt as their major worries.

It is believed that Thompson gave them the assurance he intended to deal with the deficit by reducing government spending.

"We didn't see much slowdown in the first quarter and we have to wait and see how it goes for the rest of the year," Francis said while cautioning against painting any "alarmist" scenarios.

Yes, he added, both the United States and Britain might be heading into stormy weather, but Barbados wasn't as vulnerable to fallout from the situation in the United States because of the "strength of the British pound" against the United States dollar.

Positive outlook

"So there is cause for not being bleak about the prospects," the analyst insisted.

"I expect things not to be easy and to be more difficult going forward, but I think that the policy response thus far seems to be the correct policy response.

"Yes, I would say that the Government is on the right track and they are gradually tightening fiscal policy. International reserves have increased which is good in terms of any worries on the external side as well.

"We have to wait and see how they continue going forward. It is going to be more difficult for sure, given the fact that there is a global slowdown in some of the major tourism markets for Barbados and secondly the high oil prices."