Already witnessing a decline in tourist arrivals from its number one source market, and struggling to pay back a massive debt, the Barbados economy could be about to suffer another severe blow.
Following yesterday’s decision by the US Federal Reserve to raise interest rates by 0.25 per cent to one per cent, the third such hike since the 2008 financial meltdown, President of the Barbados Economic Society (BES) Jeremy Stephen today warned that there could be negative implications for vital tourism.
He explained that the action taken by the US monetary authorities to stave off rising inflation could make it more expensive for US tourists to come to these shores.
And with pressure also building on the British pound following the United Kingdom’s decision last year to exit the European Union, Stephen cautioned of similar fallout from the British market.
“So as a result one would expect for this year that the tourist spend may very well fall in reflection of this, because as a destination Barbados will become a little bit more expensive than it did a year ago for the British traveller,” the economist explained.
His comments come in the wake of back-to-back declines in arrivals from Barbados’ number one source market –– the UK –– whose arrivals dipped 2.2 per cent last December and nine per cent decline in January, despite an overall 5.2 per cent increase in arrivals last December and a 0.1 per cent decline in January.
Stephen warned that the increase in US interest rates could spell more bad news and could even affect the island’s ability to service its external debts — an issue which was also highlighted by international ratings agencies Moody’s and Standard & Poor’s, as they downgraded Barbados.
“So external debt, any debt that we wish to take on from overseas is going to rise, and any current debt that we do have from external sources like the Credit Suisse loan . . . the interest on those is about to go up even more as a result because those are US dollar loans that we took on,” he said.