Barbados Today

The Barbados economy is expected to be the second worst performing in the English speaking Caribbean this year, with only the hurricane ravaged-Dominica performing worse, according to a United Nations (UN) regional commission.

Overall, the local economy will record the fourth worst growth rate in the Caribbean and Latin America, registering stagnant growth, the Economic Commission for Latin America and the Caribbean (ECLAC) said in its latest report.

ECLAC, whose functions include enhancing the region’s social development, predicted zero per cent growth this year, slightly better than the 0.5 per cent decline predicted by the Central Bank of Barbados at the beginning of this month.

Only Venezuela’s whose economy is predicted to register -12 per cent growth, Dominica’s at -6.4 per cent and Argentina’s at -0.3 per cent are forecasted to perform worse than Barbados.

Overall the Caribbean is expected to grow by an estimated 1.7 per cent this year, after witnessing a “standstill” in 2017, the report, released yesterday, said.

The Caribbean and Latin America together should experience a growth rate in the order of 1.5 per cent.

Antigua and Barbuda is expected to record the strongest growth in the English-speaking Caribbean – the fifth highest rate of growth overall – at 4.2 per cent, followed by Grenada at 3.5 per cent and Guyana at three per cent.

According to the ECLAC document the growth in the region was due mainly to “a rebound in domestic demand, private consumption especially, and a slight increase in investment”.

The survey pointed out that the regional growth was taking place in a complex global scenario, characterized by trade disputes between the United States, China and other nations; growing geographical risks; a decline in capital flows toward emerging markets in the last few months; rise in sovereign risk levels; depreciations of local currencies against the US dollar, and slowing global economic expansion.

The report anticipated that total public spending would increase this year as a result of a greater need for reconstruction in the sub-region after several devastating natural disasters, with increases in capital expenditure of 2.8 points of gross domestic product (GDP) in Grenada and 0.8 points in Antigua and Barbuda.

“However, current primary spending should continue its downward trend, owing to fiscal consolidation programmes in Trinidad and Tobago (-1.8 points of GDP), Suriname (-1.8 points), Barbados (-1.7 points) and Antigua and Barbuda (-1 point),” the report said.

While it was not immediately clear if the survey took into consideration Barbados’ suspension of debt payment, it also pointed out that interest payments by Caribbean governments was expected to end this year “at values similar to those of 2017, of 3.2 per cent of GDP”.

“Of the 13 countries with available information, almost half have recorded lower interest payments in 2018, with particularly large declines in Barbados and Jamaica, both of which have public debt servicing costs of over seven per cent of GDP but have continued to cut debt sharply, which will translate into lower interest payments in the coming years,” said the report, which puts Barbados’ public debt at 89.3 per cent for the first quarter of this year.

The 232-page report said fiscal policies in the Caribbean continued to focus on generating primary surpluses to deal with the heavy burden of public debt.

“In this context, the average primary surplus is expected to rise from 1.1 per cent of gross domestic product in 2017 to 1.9 per cent of GDP in 2018, with a decline of similar magnitude in the overall deficit.

“Some countries in the sub region are implementing considerable fiscal adjustment, especially Trinidad and Tobago, which is aiming to reduce its primary deficit from 5.4 per cent of GDP in 2017 to zero per cent in 2018,” the document said.

It said governments’ public debt remained stable at 68.6 per cent of GDP in the Caribbean in the second quarter of this year, similar to 2017 year end levels.

Inflation was about 2.5 percentage points in the non-Spanish speaking Caribbean as at April 2018.

Meanwhile, international reserves in the region continued to grow this year, although at a slower pace than in 2017, the report said, while pointing out that the gross debt issues by Latin American and Caribbean countries in international markets amounted to US$68.719 billion in the first six months of 2017, about seven per cent lower than the prior year.

ECLAC Executive Secretary Alicia Bárcena said Latin America and the Caribbean had made significant efforts to increase investment flows, but was faced with “the challenge of improving sectoral composition to incentivize our economies”.

“Our region continues to growth, although at a slower pace than what was projected several months ago, despite international turbulence. That is positive, but it demands that we redouble our efforts to prompt a reactivation, without resorting to excessing fiscal adjustments. Regional integration can play an important role here and we must aim in that direction,” Bárcena said.

The global economy is expected to grow at a rate of about 3.3 per cent this year. marlonmadden@barbadostoday.bb