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Foreign reserves a key concern

BEA DOTTIN, [email protected]

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Average Barbadians as well as the local business community will be looking for further evidence of the Barbados economy’s stability when Central Bank of Barbados Governor Dr DeLisle Worrell presents his half-year report.
Today, Worrell is set to release his official report on economic activity over the past six months, and this will be followed by his quarterly Press conference tomorrow.
The island’s lead economist has been making every effort over the past 12 months to present the bank’s prognosis – that the economy was stable but growth has been anaemic, hovering around 0.5 and one per cent over the last six quarters.
During his last quarterly statement, the Governor said, “We may be witnessing the beginnings of a slow recovery but there is some distance further to the resumption of sustained economic growth.”
Even more important, the Central Bank boss said the economy recorded a balance of external receipts and payments in the first quarter of the year, while the crucial foreign reserves levels increased by $3.8 million to reach $1.42 billion at the end of March.
In the face of criticism that the economy has not been able to generate enough foreign currency to meet the needs of the economy, Worrell explained that net long-term capital inflows for the private sector were sufficient to cover external debt service, including $37 million in amortization and $50 million in interest payments on foreign bonds and loans from international institutions.
At the same time, the Central Bank Governor acknowledged that the current account of the balance of payments “continues to be adversely affected by persistent increases in the prices of oil and commodities”.
And in a recent exchange with members of the media, he said protecting the island’s foreign reserves position was paramount.
“We can only do as much as the foreign exchange available permits us to do. We can only grow as fast as the increase in foreign exchange permits and our growth has to be led by the foreign exchange sectors,” he explained.
At the same time, Worrell warned Barbadians that the global economy was still in flux and so economic predictions could change at any time.
“The world is an uncertain place. You make a forecast but you are not sure what is going to happen. So we monitor every day,” he explained.
Meanwhile, he said the economy was expected to grow by a little less than one per cent in 2012, with the major contribution coming from tourism and construction, much of it tourist-related.
And so the performance of the Barbados economy in the first half of the year will be crucial to achieving even that projected one per cent growth.
He has projected the current account deficit to widen slightly, based on a projection of higher oil prices.
“Foreign direct investment in tourism-related projects is expected to be higher this year, with inflows for major projects such as the Four Seasons Resort, the Merricks Resort and Port Ferdinand.
“While some losses are projected, foreign reserves are expected to remain at levels that are adequate. The Central Bank and the fiscal authorities monitor the external accounts on a daily basis with a view to timely fiscal and monetary action to protect the foreign exchange reserves as necessary,” he disclosed. (GE)