Barbados is among seven of the 19 borrowing members countries (BMCs) of the Caribbean Development Bank (CDB) expected to record economic growth of less than two per cent this year.
The Barbados-based CDB is forecasting growth of 1.8 per cent for Barbados in 2017, a slight improvement on last year’s 1.6 per cent.
All BMCs are expected to record positive growth this year, lending to an expected overall average projected growth of 1.7 per cent for the region, compared to the disappointing 0.9 per cent decline recorded in 2016, the regional lending institution said.
The Central Bank of Barbados did not give an estimated growth rate for this year. However, Governor Dr DeLisle Worrell, in presenting the latest report last month, said the outlook was encouraging, and “the forecast growth rate for the next five years continues to be about two per cent”.
Speaking yesterday at the CDB’s annual media conference, Director of Economics Dr Justin Ram said growth in the region was expected to be driven by increased tourism activities and construction, mainly in the tourism industry.
At the same time he pointed out that high unemployment and underemployment continued to be a serious challenge for some regional states.
“Growth is consistently lower than in other small island developing states. Even as the region recorded positive growth in past years it continued to lag behind other small states,” Ram reported.
Seven other countries – Dominica at 1.7 per cent; Montserrat 1.5 per cent; St Lucia and Trinidad and Tobago one per cent each; The Bahamas 0.9 per cent; and Suriname 0.4 per cent – are expected to perform even worse than Barbados.
The CDB report showed that Barbados continued to lead the pack of borrowing member states with the highest level of debt at 145.3 per cent of gross domestic product in 2016.
“More than half of the BMC’s are saddled with debt ratios in excess of 60 per cent of gross domestic product, the level at which growth become a drag on growth,” Ram said.
“The economic cocktail also extended to foreign currency reserves which were below benchmark levels in some BMC’s in 2016. These declined year-on-year to less than the equivalent value of the global benchmark of three months of imports, for example, in Barbados. There were improvements in the Bahamas and Suriname but reserves remained below the three months threshold in these countries as well,” he said.
The CDB economist appealed to regional governments to act now to improve the Caribbean’s economic prospects, stressing that policymakers must be prepared to
“set the right environment to tackle the obstacles to growth”.
“That is to say the doing business environment including access to financing for micro, small and medium-sized enterprises and labour market reforms, which all of this could increase productivity and enhance competitiveness,” he advised.
“In this endeavour, it would be necessary to reform governance structures and institutions to support the new paradigm. Governments would have to be willing to stabilize their economies through fiscal and debt consolidation and to develop strong targeted social development programmes,” he added.
Earlier this year the International Monetary Fund revised downward its economic growth projection for Latin America and the Caribbean.
In its World Economic Outlook Update last month, the IMF said it was predicting 1.2 per cent growth for the region for 2017, which is 0.4 per cent less than the 1.6 per cent it had estimated in October last year.