Uncertainty up ahead
THE DAWNING OF A NEW YEAR often generates hope and the chance of fresh possibilities. Such optimism is reflected in the familiar greeting at this time: “Have a prosperous New Year”.
In that wish people look towards the future with the desire that what lies ahead would be much better than what they experienced.
Yet, as Barbadians sober up from this season’s festivities, their hopes for a brighter future could be replaced by apprehension and, in some cases, genuine fear of what 2013 could hold for them and our blessed country.
I say this because the glimmer of hope for a better 2013 here was blanked last weekend starting Thursday.
That’s when the Barbados Chamber of Commerce & Industry (BCCI) emphatically stated that there would be job losses in the business sector in the new year unless action was taken to stimulate the economy, among other measures.
The BCCI statement declared loudly what has been said in hush tones for the last few months; that is, businesses are haemorrhaging badly and can no longer contain their losses.
Quietly, within the last two years, a number of them have been laying off staff and in the service sector in particular, some workers have been surviving on three- or four-day work weeks, to ensure everyone remained employed. It was just a matter of time before this stopped and jobs were cut. 2013 seems to be that time.
The BCCI statement noted too that “with costs rising and salaries remaining relatively flat, workers are experiencing an internal devaluation”, and for the second time the chamber called for stimulus measures to jump-start the economy.
Then, that afternoon, Moody’s Investors Service downgraded Barbados’ credit rating, citing our lukewarm economy and rising Government debt. The rating also carries a negative outlook, with the agency saying that the country’s economic prospects remain weak.
While trying to grasp the full implications of these developments, the response of Minister of Finance Chris Sinckler on Friday told us clearly that no matter who says what, Barbados’ economy was on a specific path and there would be no deviation or variation from it.
He also set the BCCI straight in that response to Moody’s action, stating, in part: “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.”
On Sunday, Moody’s vice president and senior economic analyst Aaron Freedman in speaking frankly on Government’s plan said the administration’s Medium Term Fiscal Strategy “relies on some optimistic assumptions”. He said if the ruling Democratic Labour Party (DLP) were re-elected “there is a strong possibility that it will propose either an alternative to, or some revisions to the Medium Term Fiscal Strategy”.
Freedman also said the island might have to consider an “internal devaluation of some sort”. This means reducing real wages at a time of rising inflation so that “wage increases wouldn’t keep pace with inflation”. And that action would help stave off devaluation of our currency.
As if that wasn’t enough gloom to dampen our Christmas preparations, Ryan Straughn, the president of the Barbados Economics Society (BES) stated Monday that the economy could worsen unless the Government moved swiftly to correct its ills.
He said: “The Government has not been able to pay its bills for five years now and in spite of raising fees, VAT and excise taxes, along with shifting some of the expenditure of statutory corporations to the NIS, we are still in Parliament getting supplementary budgets.
“Tax revenue is at an all-time high and despite this we can’t pay our bills . . . . Job losses in the private sector are increasing and given that all the NIS and taxes come from the private sector, there will soon come a point when the Government will be competing for the NIS benefits to finance their operations rather than those benefits being extended to persons who actually paid them.
All should be very concerned about the state of the public finances and the economy.”
Yet, in the face of these diagnoses on the wrongness of Government’s medicine to revive the economy, the minister is adamant that the path we’re on is the one to take.
What does Sinckler and his advisors know that S&P, Moody’s, BCCI, BES and others who voice their concern about our economic direction aren’t aware of? Will we have to wait until after a DLP victory in the general election for them, as Freedman suggested, to change or adjust their plan?
Based on what these independent experts are suggesting, the only thing that seems certain is continued deterioration in Barbados’ already weak fiscal position and greater hardship for the average Barbadian.
But who knows, Sinckler may indeed be right. One just hopes he is more accurate about this than he was on Dominica and St Vincent and the Grenadines institutions investing in the Four Seasons Project.
• Sanka Price is the SATURDAY SUN editor. Email him at [email protected]