The Barbados economy grew by an estimated 1.7 per cent during the first quarter of 2016, which is below the pace the Central Bank had expected.
As a result, Governor Dr Delisle Worrell today revised slightly downwards his original 2016 projection for economic growth.
Reviewing the economy’s performance from January to March, Dr Worrell said Gross Domestic Product (GDP) was now expected to expand by 1.6 per cent in 2016, down from the 1.8 per cent he had announced at the start of the year.
This compares to the 0.9 per cent by the Caribbean Development Bank for the island for 2016. In its recently published Caribbean Regional Outlook newsletter for Spring 2016, Scotiabank also said there were “encouraging” signs that the Barbados economy was set to record 1.5 per cent growth this year, up from the 0.5 per cent performance recorded last year.
In its World Economic Outlook released last month, the International Monetary Fund had also projected 2.1 per cent growth, which was well over the -0.5 per cent forecasted for Latin America and the Caribbean.
However, while releasing its more modest projection today, the Central Bank said growth would be led mainly by tourism and ancillary activities.
Dr Worrell also reported that the country’s international reserves had increased by $11 million to reach $938 million, representing 14 weeks of import cover as at April 30.
The Central Bank’s first quarter report, which was criticized by Opposition members for being released later than usual, mentioned an increase in net private inflows by approximately $19 million, largely due to the proceeds from the sale of Banks Holdings Limited to Brazilian conglomerate, Ambev.
“Private net investment inflows are estimated at $170 million for the quarter, above average of $107 million over the past four years. Public inflows were $89 million and external payments were $83 million,” said Dr Worrell.
Government debt remained a major challenge.
Dr Worrell reported that interest and amortization of the external debt grew to reach $441 million in financial year 2015/2016, representing about 9.8 per cent of foreign exchange earnings.
“The net public sector debt stood at 69.9 per cent of GDP at the end of the fiscal year, compared to 67.5 per cent as at March 2015. The gross public sector debt ratio was 107 per cent,” said Dr Worrell.
He revealed that the Central Bank had provided $190 million of “newly created money” for financing of Government’s deficit. This was in addition to commercial banks’ increased financing of Government by $154 million over the fiscal year.
“In addition, the Central Bank advanced $238 million to Government from additional liquidity which commercial banks accumulated at Central Bank,” he said.
“The National Insurance expanded their investment in Government securities by $71 million and pension funds, businesses and others lent $109 million,” the Central Bank Governor added.
In relation to the economic outlook, Government’s top adviser said total investment in infrastructure, tourism facilities and alternative energy was expected to be 23 per cent higher in 2016 than it was last year.
In addition, 2016 summer airlift capacity that will benefit tourism is expected to be up 4.5 per cent, with increases from the United Kingdom and the United States.
“The fiscal deficit for 2016/2017 is projected to be five per cent of GDP on the basis of expenditures approved by Parliament in March 2016,” said Dr Worrell.
“This compares with projected nominal growth of GDP of 2.5 per cent, implying a further increase in the gross debt to GDP ratios,” he said, adding that a Budget and Financial Statement was expected shortly in an effort to close the gap.
During the first three months of this year, there was a six per cent increase in chemicals, the island’s largest physical export category.
Fuel imports fell by 37 per cent while the volume of fuels imported was down by 16 per cent, representing a saving of $33 million or five per cent of all imports for the quarter under review.
There were declines for most other imported goods including food and beverages, which contracted by four per cent, said Dr Worrell.
He also reported a slowdown in the installation of solar photovoltaic systems by homeowners and businesses linked to continuing low fuel prices that have contributed to a sharp drop in