Central Bank Review
The following is a release from Central Bank of Barbados Governor Dr DeLisle Worrell on the country’s economic performance during the first quarter of 2011.
Tourism led recovery
The winter tourist season has been encouraging, with a significant rebound in tourist arrivals from Britain and the United States. This was the main cause of the growth of real GDP in the first quarter, estimated at 2.8 per cent.
The stock of international reserves stood at $1 474 million at the end of March 2011, $20 million above that recorded at the end of 2010, and equivalent to approximately 20 weeks of imports of goods and services.
However, as a result of soaring international oil and commodity prices, the average rate of inflation for the 12 months ending January 2011 increased to six per cent. The unemployment rate for the last quarter of 2010, which has now become available, was 10.5 per cent.
Marketing efforts and incentives directed to the British market appear to have paid dividends, and arrivals from Britain posted growth of 15 per cent. The announcement of a temporary freeze in further increases in Britain’s air passenger duty (APD) removes a potential threat to recovery in this market.
Arrivals from the US grew seven per cent, aided by additional airlift capacity from the southern region. However, arrivals from Canada fell slightly, largely because of competition from Mexico.
The West Indies Cricket Board’s T20 tournament may have been instrumental in boosting regional arrivals in January, but relatively high airline prices have continued to hamper travel within the Caribbean. Arrivals from the region fell by 2.1 per cent in February.
Cruise arrivals increased by an average of 1.5 per cent over January and February; however, cruise has represented only 18 per cent of total tourist days for the year thus far.
$49 million more in earnings
Overall, travel receipts are estimated to have grown by $49 million, seven per cent more than the earnings received during the first three months of 2010.
The number of active companies in the International Business and Financial Services Sector at the end of March 2011 was 2 411, a six per cent increase compared to March 2010.
Private capital inflows were significantly higher than in the corresponding period of 2010. The main reason was the transfer of funds associated with the sale of shares in the Barbados Light and Power Co. Ltd to EMERA Inc.
Tourism receipts contributed 60 per cent of foreign exchange inflows in the first quarter, with other services, mainly international business and financial services contributing a further 12 per cent.Other significant contributors to foreign exchange earnings were chemicals (two per cent), and crude oil and rum (about one per cent each).
Foreign exchange down
The sugar industry is expected to contribute more foreign exchange earnings during 2011, as a better harvest should result from higher yields than in 2010.
Foreign exchange earnings fell short of import demand by an estimated $45 million. Imports of consumer goods rose 15 per cent, largely reflecting the rise in world commodity prices, which were 34 per cent higher than in February of 2010.
Oil prices were 37 per cent higher on average than for the first quarter of 2010, driving up imports of fuels by 19 per cent. Imports of machinery and other capital goods rose 12 per cent.
Indicators of construction activity, and mining and quarrying, recently updated to the end of 2010, showed an improvement in the latter half of the year. As a result, the estimated outcome for real GDP in 2010 is now a positive 0.3 per cent as opposed to the negative 0.4 per cent estimated earlier on the basis of partial data.
The Retail Price Index for the 12 months ending in January 2011 was six per cent higher than a year earlier, a slight acceleration from December (5.8 per cent) and January 2010 (4.5 per cent).
Oil price hikes
The recent surge in international oil and commodity prices, coupled with the fiscal measures from the 2010/11 Budget, were the main factors accounting for the rise in prices of food (2.3 per cent), transport (0.9 per cent), housing (0.7 per cent), fuel and light (0.4 per cent) and household operations and supplies (0.5 per cent).
These are the average values of price indices in the 12 months ending in January 2011, compared with the 12 months ending January 2010.
The level of unemployment declined from 11.2 per cent in September to 10.5 per cent in December, but remained 0.5 percentage points higher than at the end of 2009. The average rate of unemployment for all of 2010 was 10.8 per cent, compared with 10.0 per cent in 2009.
More tax intake
Preliminary estimates suggest an improvement of $90 million in the fiscal deficit compared to the 2009/2010 fiscal year, equivalent to a 1.6 per cent reduction in the ratio of the fiscal deficit to GDP.
Tax revenue grew by four per cent over the fiscal year, largely due to the changes in tax rates