WHAT MATTERS MOST: Economy way off course
IT IS BECOMING intellectually embarrassing to analyse the Economic Review. No wonder the Government’s fiscal affairs are in such shambles and, by extension, the economy, not just the people, is confused. The policies contradict growth and twisted reasoning is used to explain growth if it appears.
Imported fuel prices are falling but local prices are rising. Even the volume of fuel imports is falling so transportation of people and products is down. There are some very unusual economic signs in Barbados that need to be studied.
All imports, including food and beverages, are falling but local production is not rising. It ought to be fascinating to most economists that local production is not increasing and yet the economy is growing. Sugar production is no longer being reported. Construction is still down. Government has no capital projects.
There is a deliberate attempt to keep Barbadians off-balanced about the true state of what is confronting us. This explains why the economic spokesmen are saying one thing and the international credit rating agencies appear to be doing another.
In the Estimates debate in March, the Opposition Leader pointed out many things about the Government’s fiscal numbers but she was adamant that the projected Government revenue was highly optimistic. The recent Economic Review has confirmed that she was absolutely right.
There is a very clear pattern of behaviour by the Government to over-project its revenue, which understates the fiscal deficit. This creates an air of optimism. Unfortunately, it may excite some people but those who matter most are in touch with the strategy.
The Government has now added talking about the accrual accounting system to its strategy as another way of bamboozling the Barbadian public. The Government is not in a position to genuinely use accrual accounting because it is not yet adequately practising it. The following analysis demonstrates how it is being misused to confuse.
On Page 2 of the recent Economic Review, it is stated that the “Government committed to a new medium-term programme of fiscal consolidation, which saw the reduction of the 2014/15 deficit to 6.9 per cent of GDP”. This figure is also available at Table 4: Summary Of Government Operations on Page 8. It is not arrived at using the so-called accrual accounting.
The sentence following the one in quotation marks above is “the estimated deficit for fiscal year 2015/16 was 5.4 per cent, in excess of the targeted accrual deficit of 4.5 per cent at the time of the Minister of Finance’s Economic Statement in June 2015”.
The reader ought to believe that all the deficits are comparing apples with apples. They are not.
Here is the concern. In the same Table 4 noted above, there is a deficit of 7.4 per cent of GDP for 2015/16. This figure can be compared to the 6.9 per cent but not the other two numbers in the paragraph above. The latter would be comparing apples and oranges. This is being done consistently to confuse the Barbadian public but it would not confuse the international experts.
It is time for the Central Bank to stop using the deficit on a so-called accrual basis when it must be aware of the inadequacies. The Estimates document is still not presented using the accrual accounting system. A time will come when the switch to such a system will be justifiable. That time is not upon us yet.
There is another related issue. During the last Estimates Debate in March, the Opposition Leader argued that the projected deficit for the year 2015/16 was being understated. Time has shown again that she was correct.
In the circumstances, it became imperative to have a no-confidence motion such that she could lead the debate on the economy, and she did so with telling effect. It is the only real time that the other side gets to introduce the issues that it wants to debate in the interest of the country. The evidence from the debate is there for all fair-minded people to see and evaluate.
The issue of economic recovery is a serious one. It must not be politicised. Indeed, the jury is still out on how deep the economic decline was. The Barbados Statistical Service has not been allowed to publish its real GDP figures.
If a boat drifts 20 miles offshore, a mere 100 metres back to the shoreline cannot in any way represent recovery. It is a change of direction that must continue for a prolonged period. Given the imagery, the Barbados economy is far from shore and sure.
• Dr Clyde Mascoll is an economist and Opposition Barbados Labour Party adviser on the economy. email: email@example.com