One regional economist is forecasting that Government reform will take centre stage this year and should result in a turnaround in economic fortunes.
Marla Dukharan made the prediction in her Caribbean Economic Outlook 2019 broadcast this week as she examined the region’s economies and their exposure to international developments.
She said while some Caribbean economies would continue to struggle to regain a strong footing in their tourism growth due to lingering effects of the 2017 hurricanes, there were others that should see a turnaround in their economic fortunes.
She said growth was forecast for all regional economies except Barbados and Puerto Rico, -0.1 per cent and -1.1 per cent respectively.
“Puerto Rico and Barbados are projected to show some contraction this year. Puerto Rico, because of their structural problems but also lingering effects of the storms; Barbados, because of the massive fiscal adjustments that are taking place and the IMF (International Monetary Fund) programme really taking effect this year,” she said.
Recalling the disappointing 0.5 per cent decline in the Barbados economy for the first nine months of last year, Dukharan said there were several projects that could easily contribute to positive growth this year.
“There is a lot that is happening that can counteract the negative growth. For example, construction and investment, but we still have generally high unemployment of around 9.2 per cent and inflation that trended higher as well,” she said.
Highlighting the tax measures implemented by the Mia Mottley-led administration last year and the deal between the IMF, the regional economist singled out the tax reform, saying this especially showed just how serious government was about transforming the economy,
She said Barbados “is likely to be the next success story in the Caribbean after Jamaica should they continue along this path of adhering to the guidelines outlined by the IMF”.
“The things to watch out for this year is basically the fact that the government is going to push through a lot of reforms. We saw the taxation reform for corporation tax being equal onshore to the offshore. That I think is one of the major things that demonstrated how serious and committed this government is to reform and also to abiding to the demands of the international institutions,” she said.
“The government does seem committed to the IMF programme. I think that they will continue to adhere to the guidelines and we will continue to see the economy improve,” she added.
After last year’s revenue-raising measures and phases one and two of the retrenchment exercise under the Barbados Economic Recovery and Transformation (BERT) programme, Government is expected to embark on the third phase this year, which would include more retrenchment of government workers, as well as training and retooling of staff and a digital transformation of government processes.
Dukharan warned that Barbados and other Caribbean islands remained susceptible to external shocks including BREXIT, trade tensions between the US and China, higher interest rates in the US, fluctuating oil prices and volatility in the international financial market.
She also stated that the region was vulnerable to various health scares from Venezuela, pointing out that the Spanish-speaking nation continued to pose “the most immediate and serious longer-term risks to this region”.
“We desperately need civility in Venezuela not just for Venezuela but for the Caribbean region as well,” she said.
Dukharan said she expected the Trinidad and Tobago economy to be further downgraded and authorities there to likely approach the IMF for help by 2021 or 2022.
“Authorities there are painting a completely different and untrue picture of the state of affairs and state of the economy there,” said the Trinidad-born.