Barbados in economic muddle
IT HAS BEEN AIDED by a tourism rebound and sustained lower oil prices, yet Barbados’ economy “continues to muddle through turbulent times”.
That’s the Inter-American Development Bank’s (IDB) latest view in its Caribbean Region Quarterly Bulletin.
As a result of the continuing challenges, the bank’s Caribbean economics team expects Government’s fiscal consolidation to be accelerated this year.
The IDB noted that a favourable external environment eased Barbados’ macro management last year. Tourism arrivals rebounded, and lower oil prices helped to improve the island’s external position, it added.
However, the problem was that domestic factors simultaneously “took toll on economic growth”.
“Fiscal consolidation reduced the fiscal deficit, but is yet to stabilise the increase in public debt. Inflation remained below two per cent for the duration of 2015, and unemployment fell slightly. Overall, these indicators suggest that Barbados’ economy continues to muddle through turbulent times, but is benefitting from external factors.”
In terms of the outlook, the IDB pointed to the Central Bank projection that the economy would grow by 1.8 per cent this year. This was expected to be driven by another strong tourism performance, helped by “the continued recovery across the main source markets and the additional airlift”.
It added that “if tourism-related construction projects start as scheduled over the second semester of the year, the construction sector would be more dynamic leading the non-tradable sectors”. Barbadians however, should not expect an ease in austerity measures. In fact, the IDB expected an escalation of fiscal consolidation.
“A greater effort would be required to stabilize public debt and 2016 could see the implementation of new tax measures and austerity.
“However, further reducing the financing needs on the expenditure side would be subject to revisions to transfers and subsidies to state-owned enterprises,” the bank said.
“The current account deficit would gradually continue to improve in 2016.
“International oil prices would likely remain low and contain the oil import bill. At the same time, a more dynamic export sector, tourist arrivals and receipts would contribute more to lower the current account balance.” (SC)