Tourism was the only sector of the Barbados economy which recorded measurable growth last year.
And Government is looking to the industry again this year, along with construction, to drive a much-needed recovery.
Central Bank Governor Dr Delisle Worrell today presented his review of the economy’s performance in 2015, while looking ahead to the next five years, in which he is forecasting that real Gross Domestic Product (GDP) will expand by 1.7 per cent on average.
He confirmed that the economy registered a marginal 0.5 per cent growth last year, in line with a revised forecast given in the second half of the year.
For 2016, however, the Central Bank Governor is projecting a better economic performance that will be highlighted by a 1.8 per cent growth of, measuring the value of national output.
Tourism, which had its best results last year since 2007, will drive the improved economic performance.
Dr Worrell said the island’s competitive strengths in tourism, coupled with a projected seven per cent increase in airlift during the current winter season and the completion of a new berth at the Bridgetown Port, should augur well for growth.
“In addition, the planned investment of $1.3 billion in new hotel plant over the next five years is projected to increase hotel room capacity by 40 per cent,” the Governor said, adding that “over the next five years, real GDP is forecast to expand by 1.7 per cent on average, peaking at about two per cent in 2017 when major tourism infrastructural projects, such as Sandals, Wyndham and other tourism development projects are expected to be in process or completed.”
Construction, which decreased by three per cent last year, is expected to rebound in 2016 and contribute to the recovery. Worrell blamed unexpected delays in the start of major infrastructural projects for the sector’s 2015 performance.
He also reported that “the retail, business and other services sectors saw limited spillovers, because there was no impetus from the foreign exchange sectors, other than tourism”.
At the end of the year, international reserves held by the Central Bank stood at $927 million, the equivalent of approximately 14 weeks of imports.
However, net long-term foreign exchange inflows were lower last year than they were in 2014, with Government having a significantly higher debt
Retained imports declined by 11 per cent, principally due to a 31 per cent or $380 million reduction in payments for fuel imports. Consumer goods imports were also down by 11 per cent, so too the total export of goods by about seven per cent, owing to declines in food exports.
Exports of chemicals rose by one per cent while rum exports rose by three per cent.
In his report, Worrell also pointed out that the production and use of renewable energy products continued to offer an opportunity for major saving of foreign currency, which would allow for faster growth of “our foreign-exchange dependent economy”.
“In addition, it could reduce the costs of production, create new job opportunities, and foster a cleaner environment,” said Worrell, who projected an increase in Government revenue in the coming fiscal year, which runs from April 1, 2016 to March 31, 2017.
At the same time, he said there would be changes to the structure of Government departments and official agencies, which were designed to reduce expenditure and support the objective of deficit reduction.
“Over the next five years, Government’s deficit is forecast to fall gradually to around 1.5 per cent of GDP, in the absence of further measures. On this trajectory, the net public sector debt to GDP ratio falls to 60 per cent by the end of the 2020/2021 fiscal year,” he said.