THE ISSUE: All eyes on Govt’s direction for economy
On February 21, Barbadians went to the polls and re-elected the Democratic Labour Party to lead the country, albeit with a much smaller majority.
Many have taken this to mean that electors were not satisfied with the way Government was running the country, especially in relation to the economy.
With low economic growth projected for this year, individuals and businesses alike will be looking to the new Government to take steps to improve the country’s prospects.
In the January 28 edition of the BARBADOS BUSINESS AUTHORITY, president of the Barbados Economic Society Ryan Straughn said the projected 0.7 per cent growth suggested that not much was expected from the island’s struggling breadbasket – tourism – and that alone was worrying.
“The short-term prospects are not great,” he said.
“The truth is, if you are starting at 0.7 per cent for the growth for 2013, it tells me as an economist that you don’t anticipate tourism in the first quarter will do anything much – that is really the concern,” said the economist.
Straughn said the decline in revenue from personal taxes and VAT receipts was testament to the fact that the private sector, including hoteliers, were finding it increasingly difficult to maintain staff and stay in business, adding that “a lot of jobs have been shed in the private sector” over the past two years.
“The structure of the economy is such [that] we rely heavily on tourism to earn foreign exchange . . . and if we are not confident that there will be a decent tourism performance in the first quarter, then certainly it is not a good picture whatsoever,” added Straughn.
The economist therefore recommended that Government move with urgency to focus more on growing the manufacturing sector and building and sustaining the renewable energy sector.
“If we focus on reducing the cost of doing business, specifically to manufacturing, it allows them to produce more – which means then that costs would come down, and therefore the cost of living on what is produced locally would come down,” he explained.
“The truth is that Government can help themselves and they should have been helping themselves for two years now, at least, by investing in renewable energy . . . . It can still make a difference now but the fiscal situation now does not lend [to] a lot of confidence,” added Straughn.
The downgrade of the island’s foreign and local currency bond ratings to Ba1 from Baa3 with a negative outlook by Moody’s Investors Service in December was thought to be a wake-up call.
And while Government said it was not surprised by the move, the Opposition contended that it was another sign the economy was not stable.
In the SATURDAY SUN of December 22, 2012, Minister of Finance Chris Sinckler said: “The most recent ratings downgrade by Moody’s Investors Service comes as no surprise to us in the Ministry of Finance or in the Government, as a whole.”
He noted in a statement that it was generally expected that since Standard & Poor’s had made their adjustment to the country’s credit rating some months before, it was altogether likely that Moody’s would align their rating accordingly.
“Naturally, the continued weak global economic recovery, particularly among our largest trading partners in the US, UK and most of CARICOM, has worked to compound the negativity of an already difficult economic situation, which heavily undermined Barbados’ prospects for a speedy recovery in growth.
“And, in spite of what we have heard, and will continue to hear, the knock-on effects of this environment on our fiscal and economic situation remain clear and unmistakable,” the Minister of Finance said.
Sinckler deduced that the Moody’s rating showed that the worst of the economy and fiscal deterioration was behind Barbados; that the island’s prospects for short term high growth levels would remain challenged because of the weaknesses in our major trading partner economies; and that Government had to “stay the course on its fiscal consolidation programme, strengthening it wherever possible, rather than abandoning”.
He made it clear that attempts to “introduce counter-cyclical fiscal measures (tax eases) to stimulate domestically driven growth will reverse the gains made so far by the country” and “make matters much worse fiscally and economically”.
Adding its voice to the development was the Central Bank of Barbados which said that despite the downgrade “Barbados’ economic strategy remains unaffected by this action, and continues to focus on conserving foreign exchange reserves and growing the foreign exchange earning sectors”.
However, Opposition spokesman on economic matters Clyde Mascoll said Government needed to seriously adjust the measures it was taking towards fiscal consolidation and debt reduction.
The economist further called for immediate tax relief for Barbadians in order to stimulate economic growth. He said the downgrade also reflected five years of inappropriate fiscal and debt policies by the current administration.
Meanwhile, in the December 14, 2012 WEEKEND NATION, Barbados Hotel and Tourism Association president Patricia Affonso-Dass called on Government to speed up the implementation of promised initiatives which could ensure the viability of the sector.
“Although there has been some positive feedback with respect to some of the challenges, namely the sanctioning of additional items to be added to the second schedule of the Tourism Development Act (TDA) and the promise of an incentive to assist the hotels with the cost of electricity, the actual implementation of these, to date, have not taken place,” she said.
“This simply is not acceptable in a tourism-based economy,” she added.
Affonso-Dass stressed that hotels and attractions needed to continually improve their offering by keeping them fresh and current for the discerning traveller.
“The core incentives that are currently offered are in serious need of revision to not only encourage investment but to assist the industry to survive in today’s ever changing business atmosphere,” she said.
Affonso-Dass said the BHTA had long discussed the benefits of a facilitation unit within the Ministry of Tourism to ensure that challenges are efficiently routed to the relevant agencies, ministries or decision-makers for prompt solutions.