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Governor hopeful of sustained growth

Natasha Beckles

Governor hopeful of sustained growth

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Last Tuesday when the Central Bank of Barbados released its economic review for the first three months of this year, statistics showed that the economy had grown by an estimated 2.8 per cent.
This is slightly more than the revised 2.5 per cent projected by the bank in February after it was revealed that the economy had grown by 0.3 per cent in 2010 instead of contracting by 0.4 per cent. 
One would recall that in January, Central Bank Governor Dr DeLisle Worrell said Barbados’ economy must grow “substantially” in the first quarter to achieve growth of two per cent overall.
During a Press conference to discuss the country’s economic performance in 2010, Worrell said many industries “depend on the receipts that we get in the first quarter to tide them over some of the troughs that are going to come later on in the year”.
In the January 13, 2011 DAILY NATION the governor noted that “our growth is going to depend most heavily on tourism because that is about two-thirds of our foreign exchange earnings, but we also have a considerable presence in the international business and financial services sector.” 
His predictions were deemed overly optimistic by some especially in light of the 0.4 per cent contraction in the economy.
However, one month later Minister of Finance Chris Sinckler reported the revised figures based on significant increases in tourist arrivals in January from almost every market, including Britain which recorded a ten per cent jump.
According to the February 13, 2011 SUNDAY SUN, Sinckler said arrivals from Germany for January were up 42 per cent over January 2010. Caribbean travel has also improved, with the island recording a 7.2 per cent increase in arrivals from Trinidad and Tobago. 
The minister also reported that Brazilian arrivals were on the rise, noting that carrier GOL Airlines had been forced to increase its flights here. 
He noted the non-traded sector also performed better than expected in January, but said he was particularly pleased about a contraction in Government spending and a reduction in the fiscal deficit below the projected 8.4 per cent. 
“The Accountant General, who has more up-to-date figures than the Central Bank for the January period, believes that when all the figures are reviewed, the fiscal deficit might even be below eight per cent,” Sinckler added. 
However, Opposition spokesman on the economy Clyde Mascoll warned there was still a gaping hole in the Government’s finances and that “even if the economy grows at the projected rates, they will not be enough to assist us out of our misery”.
In keeping with Worrell’s projections, growth in the first quarter of this year was due mainly to an “encouraging” winter tourist season which featured a significant rebound in tourist arrivals from Britain and the United States. 
“Marketing efforts and incentives directed to the UK market appear to have paid dividends, and arrivals from the UK posted growth of 15 per cent. 
“The announcement of a temporary freeze in further increases in the UK’s air passenger duty removes a potential threat to recovery in this market. Arrivals from the United States grew seven per cent, aided by additional airlift capacity from the southern region,” the bank said.
Based on the apparent recovery in tourism in the winter season, the bank noted that real growth in the industry is expected to be in excess of three per cent in 2011, provided the summer season also recovers from the doldrums. 
However, the bank added that due to soaring international oil and commodity prices, the average rate of inflation for the 12 months ending January 2011 increased to six per cent.
This increase is expected to continue accelerating under pressure from international oil and commodity prices.
Furthermore, tax revenue from the international business and financial sector remained depressed. Still, the bank maintained that overall growth in 2011 of a little more than two per cent remains possible. 
Although Barbados’ economic fortune will be affected by rising oil prices, Worrell said at his Press conference last Wednesday that this should not affect projected growth.
In January, the International Monetary Fund (IMF) projected that oil prices would average US$90 per barrel this year and commodity prices would to be 11 per cent higher.
With the adverse effect of political uncertainty in the Middle East, the IMF’s new projections which should be issued soon are expected to be much higher.
Worrell noted too that growth would be driven by tourism, investment and construction, and there was no close correlation between oil prices and tourism arrivals.
Also, he said, investment was unlikely to be affected in the short term.