Economy grows but foreign reserves fall further

The Barbados economy grew by an estimated 1.4 per cent over the first nine months of this year but the foreign reserves have taken another hit.

This was among the information contained in the Central Bank of Barbados’ Economic Review for the January to September period.

It was issued this morning ahead of Acting Governor Cleviston Haynes’ later  Press conference.

The review said economic growth “moderated” in the third quarter of the year.

“Tourism output, which fuelled the stronger growth performance over the first half of the year, fell during the third quarter, due to a reduction in the average length-of-stay of visitors and hurricane-related disruptions to tourist arrivals in September,” the bank said.

The institution pointed out that improved tourism performance for the first nine months of the year enabled the external current account to stabilise.

However, external debt service, and a lack of major foreign inflows to offset those payments, contributed to a further decline in the level of international reserves. At the end of September, they  had declined by $133.9 million to $549.7 million, the equivalent of  8.6 weeks of import cover.

The reserve loss was greater than that of 2016, principally due to a decline in net short-term private inflows that offset a modest improvement in net public sector flows.

Meanwhile, the Central Bank said Government made some progress in reducing the fiscal deficit but there was a need for more to be done.

“The on-going financing constraint and the weakening of the foreign reserves position underscore the need for continued strengthening of the fiscal accounts, so as to restore the reserves to desired levels and create a platform for sustainable economic growth over the medium term,” it recommended.

Over the period, activity in the tourism sector grew by 4.1 per cent compared to 2.8 per cent in the corresponding period in 2016.

While September arrivals fell by 3.3 per cent, data for the January to September period of 2017 showed a cumulative growth in long-stay visitors of 6.2 per cent, compared to the same period in 2016.

Read the full report here.

Cruise passenger arrivals for the first nine months of the year rose by 17.6 per cent but this was tempered by a 21.3 per cent decline in arrivals during the third quarter.

This was attributed to a falloff in cruise calls as cruise lines adjusted their September itineraries following the impact of unfavourable weather conditions.

The bank concluded that despite moderate economic growth and tje reduction in the fiscal imbalance, the Barbadian economy continues to face significant economic challenges.

“In particular, strengthening of the international reserves is needed to ensure that the reserve buffer remains adequate in order to protect the fixed exchange rate peg.

“Current forecasts are for a moderate recovery in reserves by the end of the current fiscal year, but higher capital inflows, including those associated with public sector divestment, remain central to this outturn,” it said. (NB)