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AS I SEE THINGS: Worrying economic signs


Brian M. Francis, [email protected]

AS I SEE THINGS: Worrying economic signs

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It should not take anyone by surprise whenever a prime minister decides to praise the performance of his government in relation to the economic management of the country and the delivery of some of the many promises made to the people during an election campaign.

But as part of that exercise, the prime minister, as head of the cabinet of ministers, must present hard facts to support his claims and convince all and sundry that his statements can stand the test of times. Otherwise, people would be forced to examine data and reports on the economy in order to verify what the prime minister says.

As fate would have it, I recently heard statements from the Prime Minister Freundel Stuart about the need for economic reform which, at the minimum, leaves a lot to be desired.

According to Stuart, the economic policies of Government are working because life is once again being breathed into the economy and hence there is no need for change at this time. Unfortunately, no statistical evidence was presented in support of his assertion.

It would have been very easy for me to minimally accept the Prime Minister’s claims had I not been trained to think critically and research things that interest me. Fortunately, I did not have to do much research because the International Monetary Fund (IMF), almost as if working in opposition to the Government, released its preliminary findings from the just concluded Article IV Consultation. To put it mildly using local parlance, things ain’t pretty!

Imagine this – the IMF’s press release following the conduct of the Article IV Mission, May 9-19, 2016 said: “The economy appears to have turned the corner with activity picking up. Real GDP grew by 0.8 per cent in 2015 – underpinned by a surge in tourism arrivals – relative to 0.2 per cent in 2014 and an average of -0.3 per cent in 2008-2014…The economy faces serious challenges. Although growth has resumed and short term prospects are positive, imbalances persist between available resources and Government programmes. While favourable external developments have provided some room for maneuver, Barbados remains highly vulnerable and may not realise its potential without deep-seated reforms to align revenues and expenditures, and reduce debt. Fiscal reforms have yielded less than expected. After significant consolidation in financial year 2014/15, the deficit in financial year2015/16 remained broadly unchanged, short of Government’s objective, due to delayed implementation of June 2015 tax measures and slow progress with the reform of the state-owned enterprises. Consequently, public sector debt rose to 105.5 per cent of GDP from 98 per cent at the end of financial year 2013/14. The large cash requirements of the Government are a challenge increasingly met by the Central Bank.”

Even though the press release acknowledges the reduction in unemployment, low inflation and the possibility of a 2.1 per cent rate of growth in 2016, the statements in the preceding paragraph unambiguously amount to worrying economic signs.

 How exactly does the Government intend to resolve the fiscal nightmare it faces that is clearly not going away despite all of the new taxes and the adjustments in marginal tax rates on the value added tax and personal income since 2008?

Where is the evidence of a bona fide turnaround in the economy that has led the Prime Minister to declare that there is no need to change course when it comes to Government’s economic policies? 

I eagerly await answers to these questions, and so should all Barbadians.

 

Email: [email protected]

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