President of the Barbados Economic Society (BES) Jeremy Stephen said Governor of the Central Bank of Barbados Dr DeLisle Worrell left several unanswered questions in his economic report for 2016 presented yesterday.
Stephen was generally upbeat about the 1.6 per cent increase in economic growth, the performance of the tourism industry, the dip unemployment and the generally positive outlook.
However, he said an explanation was needed for the ten per cent unemployment the Governor quoted, while the actual income from tourism needed to be revealed in light of record long-stay arrivals.
“It stands to be considered whether these arrivals are from pure tourists or also from crew members or increase in crew members coming to Barbados. Again that is a major discrepancy that was highlighted last year in how these numbers are calculated,” Stephen said.
The economist also wondered what was responsible for the nine per cent decline in the assets of international banks offering global services and the five per cent drop in the number of international business companies, describing the revelation as “some of the more compelling information which I saw from the report”.
He also sought to make sense of the underperformance of the two per cent National Social Responsibility Levy introduced in September last year.
When Minister of Finance Chris Sinckler announced the levy in his 2016 Financial Statement and Budgetary Proposals he estimated it would rake in more than $140 million a year to fund the island’s health care and sanitation services.
However, Worrell said it had brought in a mere $8.3 million so far, leaving Stephen to wonder if administrative failure in implementing the levy was not at fault.
He said while it was reassuring that Government had managed to reduce its debt to private individuals and companies, as well as transfers to state entities, it was worrying that interest payments and current expenditure continued to rise.
“The worrying thing for me really is that interest payments rose by $53 million,” he said.
Stephen was also skeptical of the Central Bank’s continued funding of Government, saying that the slight rise in gross Government debt was an indication that “Central Bank lending had increased a lot last year. A lot more money was printed”.
“I would say that in terms of contributing to Government debt . . . it remains to be seen that the Central Bank would cut back from its $714 million in lending as it said it would. And of course commercial banks have shown to cut back on their willingness to lend as well, but the NIS is seeming to lend to Government more. It has almost doubled the amount from April to December last year,” a concerned Stephen observed.
The BES president also felt the Freundel Stuart administration would have a hard time rebuilding the foreign reserves, which fell to a 14-year low, despite an anticipated $250 million in inflows that had been pending as at the end of December.
And although he believed the Central Bank could be expected to cut back on financing Government programmes in light of the expected $250 million payday, Stephen did not appear convinced that the anticipated sums would be enough, given the fact that the reserves had fallen by around $200 million last year.
“With this amount of money coming in it is hardly going to offset the big drop we saw over the last year in international reserves and that could be quite worrying,” he said, reasoning the fall could have been due to Government’s payments to international financial institutions.
Pointing out that recent trends had suggested that Government was still struggling to reduce its expenditure, Stephen said sustained recovery was possible, but would depend on projects being financed and starting on time.