Barbados is projected to be at the bottom of the pack when it comes to economic growth this year among the 19 borrowing member countries of the Caribbean Development Bank (CDB).
The CDB today said it expected the Barbados economy to grow by 0.7 per cent this year, slightly above the 0.5 per cent which the International Monetary Fund (IMF) predicted last week, and within the 0.5 to one per cent range forecasted by the Central Bank of Barbados.
However, this means no other country within the CDB membership is projected to perform as badly as Barbados, with Trinidad and Tobago’s projection of one per cent growth being the closest.
The Antigua and Barbuda economy is expected to record the highest growth rate of seven per cent this year, according to the CDB.
Dr Justin Ram, the director of economics at the Barbados-headquartered bank, blamed Government’s current economic circumstances and uncertainty in the lead up to the general election for the poor growth projection.
He told a news conference at which the bank’s annual Caribbean Economic Review and Outlook was presented that urgent action was needed to reduce the fiscal deficit, which currently stands at 3.7 per cent of gross domestic product (GDP); slash Government spending, especially in the areas of transfers and subsidies, and to implement an “effective debt management strategy”.
The recommendations, which were similar to those offered by the IMF, the Central Bank, and a number of local economists, came a day after the Estimates of Revenue and Expenditure was laid in Parliament, which projected expenditure of $4.5 billion and revenues of $3.1 billion, leaving a $1.4 billion deficit for the upcoming financial year.
The latest Central Bank report also revealed that Government debt remained high at 145.9 per cent of GDP at the end of December last year, down from 147.5 per cent of GDP the previous year.
“Right now the cost of interest on debt is quite high. It is probably about 7.5 per cent of GDP. So Government needs to do something about that. So some debt management is required,” Ram told journalists gathered at the bank’s Wildey, St Michael headquarters for this morning’s news conference.
“The Government needs to examine its other expenditures, and particularly as it relates to transfers and subsidies, which is currently running at about 13 per cent of GDP. So that means there needs to be some reform, particularly of state-owned enterprises . . . .The Government needs to make the Barbados economy a lot more competitive and productive. That means dealing with inefficiencies in the doing business environment, and fourthly, throughout this process of reform it is really important that the Government focuses social intervention towards those who need it,” he said, adding that the administration should no longer delay critical infrastructure projects, especially those geared towards roads and upgrading the sewerage systems.
The top economist lamented that unemployment in the region remained too high, with youth unemployment as high as 40 per cent in some borrowing member states. Unemployment for Barbados stood at about 10.2 per cent at the end of December last year.
Ram also said in order for the region to be more resilient there was a need for “implementation of fiscal rules that encourage savings and debt sustainability”.
He also pointed to the need for increased productivity and competitiveness, human development, strict enforcement of building codes, and adequate insurance coverage to ensure greater preparedness against natural disasters.
Meantime, CDB President Dr Warren Smith said growth in the region was expected to average about two per cent this year, up from an average of only about 0.6 per cent last year.
However, he said this growth continued to lag behind other groupings, while adding that the region would continue to face a number of downside risks, including impact from natural disasters.
The bank officials said other risks racing the Caribbean included United States trade and tax policies, correspondent banking, a weakening US dollar, recent stock market volatility and uncertainty surrounding Brexit.