Viable economic solution a challenge

WITH THREE DAYS TO GO to Christmas Day, Barbadians are into last lap preparations for another unique Bajan Christmas, complete with emphasis on special foods and drinks, Christian kindness and festive cheer.
During this most important period for Barbadians, the best in us often comes to the fore. That’s why we strive to have our siblings with us for that special meal, and though our means may be slender, we often splurge on presents and share whatever we have with those less fortunate.
Unfortunately, some of us may have to re-examine the level of our Christmas celebrations, given the double whammy suffered on Thursday. Another credit rating agency downgraded our credit rating to junk bond status, while local businessmen warned of imminent job losses unless action is taken to stimulate the economy, among other measures.
Moody’s Investors Service downgraded Barbados’ credit rating to Ba1, citing our lukewarm economy and rising Government debt levels. The rating also carries a negative outlook, with the agency saying that the country’s economic prospects remain weak.
“While the worst appears to be behind Barbados both in terms of fiscal deficits and economic deterioration, Moody’s anticipates that the Government’s deficits will remain large for the next few years and its debt levels will continue to rise, albeit at a slowing pace,” the statement added.
Some months ago, Standard & Poor’s also downgraded Barbados’ credit rating to junk bond status.
Earlier on Thursday, president of the Barbados Chamber of Commerce & Industry (BCCI), Lalu Vaswani, warned of layoffs in the new year, with at least one company already indicating it will do this.
Vaswani outlined a litany of problems facing the private sector, including delayed value added tax (VAT) and corporate tax refunds, as well as increased operational costs linked to new labour legislation.
The BCCI boss said all this was against a backdrop of another year of economic challenges and reduced consumer spending.
In his review of the year and outline of prospects for 2013, Vaswani said: “Business owners were finding it costly to implement workplace improvements such as holiday with pay, safety and health at work, pensions and securities regulations. With costs rising and salaries remaining relatively flat, workers are experiencing an internal devaluation.”
The BCCI boss said Government’s current strategy of not stimulating the economy needed urgent review, pointing out that “a more vibrant economy will not only secure the existing employment levels but encourage new employment and investment”.
This is the BCCI’s second call for stimulus measures to jump-start the economy. Initially, the Opposition spokespeople called for the same thing and the idea was rejected. We suspect it may be again as in his reaction to Moody’s downgrade, Minister of Finance Chris Sinckler stated “that to attempt to introduce pro-cyclical fiscal measures (tax eases) to stimulate domestically driven growth will reverse the gains made so far by the country to turn around the situation and make matters much worse fiscally and economically”.
It seems, then, that we are in for more of the same after Christmas. And based on what Vaswani is saying, that would be inadequate to revive the struggling private sector.
Clearly, Government is caught between a rock and a hard place. So, too, is the private sector. We can only hope for a solution that would not exacerbate Government’s fiscal position but could sufficiently stimulate more business activity – for the country’s sake.