Despite recent positive developments in the tourism sector, the Caribbean Development Bank (CDB) says it is sticking to its projection of 0.9 per cent growth for Barbados this year.
This compares to the Central Bank’s revised forecast of 1.5 per cent growth for 2016, down from the 1.8 per cent it had previously projected. The amended forecast was due to the fact that most major investment projects are behind schedule.
Though encouraged by growth being realized in the bread and butter tourism industry, CDB President Dr Warren Smith said the Bank was holding fast to its projections for now, even though he acknowledged some other positive indicators for development.
“We are very pleased to see that Barbados has a very strong tourism product, which has greater room for development and for driving economic growth in this country,” Smith told Barbados TODAY in a frank interview this morning at his Wildey, St Michael office.
“We feel that [with] the business reforms that are now being considered and implemented . . . what you will see is more investment, both foreign and domestic, that will help both with the fiscal position and with the debt position of the country, not to mention the employment opportunities for the people. So if you find yourself in a position where you have had to displace workers from your private sector, you want to have the opportunity for those persons to be re-employed in the private sector. It is all about people’s lives. That is what development is about at the end of the day,” he added.
Smith also highlighted positive developments in the renewable energy sector. However, he stressed the need for ongoing economic transformation on the heels of ten years of “very anemic growth”, which he said had impacted the entire region.
The CDB president highlighted the impact on the Bank’s own position, pointing out that Jamaica and Barbados, its two largest borrowing member states, had been adversely affected.
It was a situation, he said, which had “hurt” the Bank’s own international rating, maintained by Moody’s at AA+, while Standard & Poor’s has downgraded the Bank’s top notch triple A rating to AA.
He explained that Barbados, the second largest beneficiary of CDB’s resources with over US$ 500,000,000 in support to date, had moved from a strong investment grade rating to what is now referred to as junk bond status.
“That is a big, big blow to us. Jamaica is our largest credit [recipient] and for a long time Jamaica has been in junk bond territory. So when you have your two largest exposures . . . that has created a challenge for us. And when your rating falls, what it means is that it is more difficult for you to borrow at as attractive rates as you did in the past, which means that it is more difficult for us to provide financing at the rates that we would like,” the CDB president stressed.
He therefore emphasized the need for structural change in Caribbean economies, which are expected to grow on average by 0.3 per cent this year, with Turks and Caicos due to record the highest rate of growth of 5.4 per cent, followed by St Kitts at 4.5 per cent and Dominica at 3.9 per cent.