THE ISSUE: Long stay visitor arrivals may have positive impact
THE PERFORMANCE OF THE Barbados economy continues to generate debate. It was especially topical last week after the Central Bank released its latest review, covering the period January to September.
There are those who suggest that the economy has generally recovered and is on a growth path.
Others assert that not much has changed, and that Barbados is still virtually in recession, a period of zero to negative growth.
In the Central Bank review, Governor Dr DeLisle Worrell reported that despite a double digit increase in long stay tourist arrivals up to the end of last month, and the fact that Barbados reduced its fuel import bill by $144 million, growth in the economy was virtually non existent.
Worrell said this growth was 0.3 per cent, which is marginal, and the Central Bank’s growth forecast for all of this year was 0.5 per cent, creeping up to one per cent in 2016 and two per cent “thereafter”.
But how does this compare with the previous Central Bank forecast and one recently issued by the International Monetary Fund’s (IMF) Western Hemisphere Department?
In its previous review for the period January to June, the Central Bank reported that the economy expanded by an estimated 0.5 per cent during the first half of the year, thanks to an encouraging tourism performance”.
“Growth of about one per cent is now expected this year, rising to a range of two to 2.5 per cent for the next three years. Tourism and construction should be the main drivers. Recent efforts to enhance the tourism product and enrich the visitor experience are beginning to take effect,” Worrell said.
As for the IMF, in its most recent Western Hemisphere Outlook released a few weeks ago, it projected the Barbados economy would grow by one per cent this year, and 1.1 per cent next year.
Based on the latest statement from Worrell, it appears that the Central Bank is less optimistic about Barbados’ economic prospects in the immediate future.
The upsurge in tourism and the lower oil prices Barbados has been benefitting from were the two main factors leading the hopes Worrell and others had of an economic rebound this year.
Construction was also expected to be an added stimulus, but events in this sector have apparently poured cold water on the economic recovery hopes this year.
Worrell noted that slower than expected progress with half billion dollars in investments, involving major construction, had been a drag on the economy’s growth prospects this year. He is still banking, however, on these same projects leading recovery in the immediate future.
Based on the projections of the IMF and other institutions, 2015 will turn out to be another difficult one for Barbados 2016 too, will be difficult, as it will be for the Caribbean.
In its recent outlook, the IMF said big fiscal deficits and “high debt” were the two key factors stalling recovery and economic growth in the region.
“While a number of countries, including The Bahamas and Barbados, recently implemented welcome fiscal adjustment measures, public debt levels in the Caribbean are still set to rise to an average of 85 per cent of GDP in 2015,” the IMF said.
It added that despite the recovery of tourism based economies like Barbados “the Caribbean continues to face significant challenges that have manifested themselves in low potential growth and stagnant productivity”.
In its recent Economic Survey Of Latin America And The Caribbean, the United Nations’ Economic Commission For Latin America And The Caribbean (ECLAC) said Barbados’ economy was likely to grow by 1.5 this year “on the back of a buoyant tourism industry and projected private sector investments worth $700 million”.
That figure might now be revised given the most recent Central Bank report.
ECLAC said: “The sluggish performance of the Barbados economy may be attributed, in part, to inherent structural deficiencies that undermine labour productivity, export competitiveness and connectivity. These will need to be remedied if the country is to return to pre-2008 growth levels.”
In its Caribbean quarterly bulletin issued in July, the Inter-American Development Bank said Barbados medium term growth outlook was “modest”, noting at the time that both the Central Bank and IMF had given a one per cent growth forecast for this year.
“. . . The dynamism of the economy would depend on sustaining the improved performance of long stay tourist arrivals, and the associated spending per tourist. New tourism related projects may have a positive impact on construction and boost domestic demand,” it added.