The Economic Commission for Latin America and the Caribbean (ECLAC) is predicting growth of 1.5 per cent for Barbados this year.
At the same time, the United Nations organization is predicting that as a result of general election, which is constitutionally due by the middle of next year, it will make it difficult for Government to achieve its fiscal targets by the end of the 2017/2018 financial year, which culminates on March 31.
In a release late this week, ECLAC highlighted that over the years government’s fiscal policies have sought to reduce the fiscal deficit through a combination of measures to boost revenue and curb expenditure, but said while some achievements have been made, government continued to struggle.
“The fiscal deficit fell to 5.6 per cent of GDP (Gross Domestic Product) in the fiscal year 2016/17, down by 4.2 percentage points compared to fiscal year 2015/16, with a primary surplus of 2.6 per cent of GDP. The gross public sector debt-to-GDP ratio also fell below 100 per cent for the first time in five years, reaching 96.2 per cent by September 2017, compared with 100.4 per cent for the same period in 2016. However, the upcoming 2018 general election may make it difficult to achieve the government target of 4.4 per cent of GDP by the end of the fiscal year 2017/18,” it said, without going to detail.
The International Monetary Fund (IMF) had also predicted earlier this year that as a result of the upcoming general election some difficulty would remain in government achieving its fiscal targets.
ECLAC in its report said while the current account deficit widened slightly to 4.1 per cent in the first three quarters of this year, which represents a 3.4 per cent increase in surplus in the service account, “the largest component of the current account was cancelled out by a 7.4 per cent fall in goods exports, which outpaced the decline in goods imports”.
“Over the last decade, the Government of Barbados has struggled to regain a firm grip on economic growth. The economy has been bolstered by the robust performance of the tourism sector and its spillover effects in sectors such as construction; however it remains highly vulnerable to external events and growth remains low,” said ECLAC.
Pointing to slowed economic activity, which reached about 1.4 per cent in the first three quarters of this year, compared to the 1.6 per cent for the same period in 2016, the Chile-based organization said “the Barbados economy is projected to achieve GDP growth of approximately 1.5 per cent in 2017, underpinned primarily by a productive performance in the tourism sector and the spillover effects on construction. The performance of all other sectors was subdued”.
The local tourism sector is on track to record another record year. The sector posted a 6.46 per cent increase in visitor arrivals for the first ten months, notwithstanding disruption to the arrivals of flights and cruise ships as a result of the active hurricane season. Cruise arrivals and calls both grew by over 18 per cent between January to October 2017.
Delivering the tourism arrival numbers earlier this week Chief Executive Officer of the Barbados Hotel and Tourism Association (BHTA) Rudy Grant said 533,296 tourists visited Barbados between January and October, putting it on track to shatter last year’s record 610,000 arrivals.
Despite this positive trend, however, the economy continues to be under severe pressure with the international reserves plummeting to US$549.7 million or just 8.6 weeks of import cover by the end of September 2017, well below the 12 weeks benchmark.
ECLAC acknowledged that reversing the decline in the international reserves remained a “priority for Government”.
“The central bank is committed to preserving the fixed exchange rate peg of US$ 1 to BDS$ 2, in order to maintain monetary stability and facilitate conversions for the numerous foreign visitors,” it said.
“In the short term, the government has initiated the sale of state-owned enterprises, such as the Barbados National Terminal Company Limited and the Hilton Barbados Resort, to bolster dwindling international reserves. However, the sale of the Barbados National Terminal Company Limited has stalled, pending the approval of the Fair Trade Commission. Long-term measures to counter any further shortfall in international reserves will focus on investments in the tourism industry,” it added.