Noted economist Ryan Straughn says after analyzing the latest Central Bank of Barbados economic report for 2015, he was left to conclude that “it reads like a nightmare”.
Tearing into the January 19 economic report in which Governor Dr DeLisle Worrell revealed that the island had achieved 0.5 per cent growth last year and was projected to realize 1.8 per cent growth this year, he told Barbados TODAY the report suggested that the economy was “not anywhere close to turn around”.
Straughn, who recently threw his hat into the political ring as a candidate for the Opposition Barbados Labour Party in Christ Church East Central, said while he understood the reasons for the low growth, he had expected that by now the economy would be on a trajectory to deliver some tangible results after “five or six years of what presumably has now
He recalled that in May last year the Freundel Stuart administration had rejected the International Monetary Fund’s projection of 0.8 per cent growth for 2015, which was the worst among 12 Caribbean countries.
However, Straughn said the fact that Barbados has now fallen 0.3 per cent below that projection told him the island was not getting any better any time soon.
He also pointed out that last year’s 0.5 per cent growth came in spite of a 14 per cent increase in tourism, adding that if this was not enough reason for alarm, the island’s reserves position had not improved in the face of relatively low oil prices in 2015.
In a detailed analysis of the Central Bank’s report, Straughn also took serious issue with its assessment of current labour market conditions.
The Bank had stated that while there has been no perceptible increase in productivity, “labour costs are estimated to have risen by one per cent per year since 2008”.
“As a result, the large gap between unit labour cost and output per worker persists,” said the Bank.
However, Straughn, who is a former Central Bank economist, suggested that the given analysis was “quite disingenuous, if not quite blatantly untrue”.
He noted that “a myriad of things” had taken place within the labour market, including that a number of people had either been made redundant, were laid off, or put on “short week, short days, week on and week off within both the public and private sectors.
“Therefore, to suggest to Barbadians that labour costs have been rising I don’t know where the Central Bank Governor and the source for that chart would have gotten this information from, but they are certainly not labouring in the same Barbados as the rest of us and I think that statement, based on what transpired or not transpired, depending on how you look at it, I don’t think anybody can take that statement seriously,” he told Barbados TODAY.
He also pointed to the decline in construction last year, saying wages within that sector “have actually gone down”.
The former Barbados Economic Society (BES) president also expressed alarm over the Bank’s statement that a projected four per cent target, aimed at reducing the fiscal deficit to $366 million, was in reach, provided that the Government completes the planned divestment of the Barbados National Terminal Company Ltd (BNTCL).
Straughn said while it was okay to have a target, “how you get there is a different matter”, warning that “the target in of itself is not contingent on divestment”.
He also questioned where Government would get the money from to generate the revenue to meet its target for this economic quarter, given the fact that tourism was not generating a lot of activities for the rest of the economy.
“These are some of the things, that when I look at the report and you see the numbers . . . I ask myself on what basis did the Central Bank make these projections?”
The other thing that really stuck out for Straughn in the report was that $238 million in additional commercial bank reserves on deposits at the Central Bank was “recycled” to Government.
He pointed out that the commercial banks’ reserves were meant to “protect us the depositors”; therefore he said “when I see a statement like this I am alarmed as a deposit holder”.
He also expressed concern that Government’s use of funds from the Sinking Fund to finance the deficit would affect its ability to meet its debt obligations.
In fact, he warned that there could be “long-term repercussions” if Government’s expenditure component was not addressed.
“It truly concerns me,” Straughn said.
In terms of the Central Bank’s forecast that the Government’s deficit would gradually fall to around 1.5 per cent of GDP over the next five years, Straughn said that was nothing but “gas”.
He also took issue with the provisional and estimated $43.4 million GDP contribution of the electricity, gas and water sector three years in a row from 2013, saying it was “impossible” for the sector to produce the same output in 2015 as it did in 2014 or 2013 given that there were some issues last year that affected the sector.
“I know it is an estimate but the estimate still has to be rooted in reality. So the Governor and his team have to go back to the drawing board on that,” he said.
“The reality is that the economy is not growing and like it or not, the continued monetary and fiscal policy is inconsistent with growth and has been now for the last six years. So unless the monetary and fiscal policy together in tandem are creating opportunities for growth there will be none,” he concluded.