IDB points out positives
THE INTER-AMERICAN DEVELOPMENT BANK (IDB) sees some positive economic signs for Barbados.
However, the financial institution – similar to others giving forecasts – says medium-term growth will reach only one per cent, which it said was based on expected starts for “tourism-related private sector projects”.
In its latest Caribbean Quarterly Bulletin dated January 2016, the IDB said, “Barbados has benefited in 2015 from stronger tourism arrivals. The external situation has also improved as a result of lower energy prices. The Government has introduced a series of new tax measures, and continued fiscal consolidation is expected over the next few years.”
The bank said “external and domestic factors had a favourable impact on the economy in 2015”.
“Higher tourism arrivals – due to recovery of the main trading partners’ economies – and lower international fuel prices had a positive impact on growth during the year. The growth led to an improved external position and stabilised reserves. Local gas prices followed the trend of global oil prices and fell during the year, which resulted in a decline in electricity tariffs,” it said.
“Weak domestic demand and low oil prices kept inflation low, below two per cent; however, unemployment remained in the double digits. The Government introduced a series of new tax measures, which led to a reduction in the fiscal deficit.
“However, fiscal consolidation has not yet stabilised the increasing trend in public debt. Growth is projected to rise one per cent in the medium term as tourism-related private sector projects begin.”
The IDB also highlighted some Government success in reducing the fiscal deficit.
“As part of its fiscal consolidation programme, the Government announced new revenue measures that contributed to reducing the financing gap. The fiscal deficit declined by almost US$10 million, to reach US$145 million at the end of September 2015, when compared with the same period in 2014,” it said.
“The fiscal deficit is projected to rise to 4.7 per cent of GDP at the end of fiscal year 2015/16, ending in March. This represents an improvement from the 6.9 per cent of GDP recorded a year earlier.”
However, it pointed out that “fiscal consolidation has not yet stabilised the increasing trend in public debt, which reached an estimated 139 per cent of GDP at the end of September 2015 (inclusive of holdings from the National Insurance Scheme)”.
In terms of where Government was accessing its finance from, the bank noted that “budget financing continued to rely on domestic sources”.
“Government financing during the first six months of the fiscal year (April to September 2015) came mostly from the Central Bank of Barbados and accounted for 82 per cent of total financing.
“The National Insurance Scheme has been reducing exposure to the sovereign from previous years and covered 3.5 per cent of the financing gap,” it added.
The IDB report was completed before the final 2015 figures were released by the Central Bank. (SC)