From Caribbean360

In an analysis of Barbados’ current economic performance, the CBB said that its forecast is based principally on expectations for the tourism sector and on major investment projects planned by the private sector and the government.

BRIDGETOWN, Barbados, Thursday January 16, 2014, CMC – The Central Bank of Barbados (CBB) Tuesday predicted that the island’s economic growth is expected to accelerate slowly from less than one per cent in 2014 to about 1.6 in 2015 increasing up to three per cent thereafter.

In an analysis of Barbados’ current economic performance, the CBB said that its forecast is based principally on expectations for the tourism sector and on major investment projects planned by the private sector and the government.

It said the forecast also took into account the strategies for strengthening the competitiveness of the foreign exchange sectors, and the potential growth of alternative energy production.

“Growth is expected to accelerate slowly from less than one percent in 2014 to about 1.6 per cent in 2015 and between two per cent and three per cent thereafter,” the CBB said, noting that for investment outlook, a conservative estimate of known private sector investments that may be expected to materialize over the next three years could total BDS$2.2 billion (One BDS =US$0.50 cents)

“In addition public sector investments and guarantees for infrastructure and participation in foreign exchange related projects are likely to be about BDS$740 million over that period,” it added.

The Freundel Stuart government is facing an uphill task in reviving the local economy and has already outlined plans to reduce the public service by 3,000 jobs. In addition, the government said it would also institute a “strict programme of attrition” across the central public service, filling posts only where it is absolutely unavoidable, over the next five years, ending 2018-2019.

The CBB said that the government has managed its debt exposures so as to limit the proportion of foreign currency earnings that is devoted to foreign debt service.

It said the ratio of foreign debt service to foreign currency earnings is seven per cent and it is projected to remain below 10 per cent for the next five years and beyond.

The CBB said the projected external debt service is also inclusive of the BDS$300 million Credit Suisse loan disbursed in December 2013.

“The net indebtedness of public sector institutions to private firms and individuals at home and abroad is equivalent to 67 per cent of GDP (gross domestic product) ,” it said, adding that the interest payments on government debt accounted for 24 per cent of government revenue in fiscal year 2012/13.

The CBB said that compared with previous economic downturns, the Barbados economy has performed appreciably better during the current economic recession.

It noted that between 2008 when the current crisis hit, and 2013, the economy contracted by three per cent in total

“In the 1981-82 recession the decline was seven per cent, and in 1990-93 it was as much as 14 per cent.

What is more, the current weakness in the international economy, and the poor performances of countries where Barbados earns foreign exchange, are without precedent since World War II.

“Barbados has mitigated the impact of the global recession on output and employment because of the country’s competitive strengths in the international market, and because fiscal policy has been used effectively to sustain foreign exchange reserves and protect the value of the Barbados dollar  in terms of US dollars.”

It said that the resilience of the Barbados economy to date, and the expected recovery in GDP growth, are driven by private investment that improves the quality of Barbados’ internationally traded services, renews local products, and extends the product offerings.

“A slump in private foreign investment inflows was the major reason behind the decline in foreign exchange reserves in 2013. “

According to the CBB, reserves declined by BDS$301 million, and net foreign capital inflows were BDS$188 million lower, at about BDS$499 million.

It said at the end od December last year, foreign exchange reserves were the equivalent of 15weeks of imports of goods and services.

“There was a small contraction in Barbados’ real GDP in 2013, estimated about 0.2 per cent. Value added in tourism fell by 1 percent and construction declined by 12 per cent. Non sugar agricultural output rose 11 percent and business & other services increased two per cent.”

The CBB said that the strategies for the growth of tourism include improving the visitor experience through sports, cultural, and environmental activities.

“Barbados already has excellent golf, polo, yachting and motor sport facilities and arrangements, and they are being extended and upgraded. Crop Over has been a major success for cultural tourism, and the development of activities surrounding the Historic Bridgetown and Garrison World Heritage site and elsewhere, all increase Barbados’ potential appeal to visitors.”

Regarding government investment and incentives, the CBB said the priorities for government investment are upgrades of air and seaports and public utilities, acting as catalysts for major tourism projects, leading the way in the use of alternative energy, and continuing to improve facilities for health, education and housing.

“A revised consumer charter for the delivery of public services is being prepared, and it will be monitored in an effort to improve the efficiency of Government bureaucracy. Financing facilities available to entrepreneurs are under ongoing review to provide affordable long term finance for enterprises,” the CBB added.

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