After contracting slightly in the final three months of last year due to a weak performance in the tourism sector for that period, Barbados’ economy is forecast to be flat in 2019.
That glum news was revealed by Governor of the Central Bank Cleviston Haynes this morning during a press conference to review Barbados’ economic performance for 2018.
During his review last November, Haynes had said economic activity contracted by 0.5 per cent during the first nine months. However, the Governor said in the last quarter the country’s economy had contracted a further 0.1 per cent.
He explained that this was due to the fact that tourism did not perform as well as expected, with cruise visitors for the year falling by almost 10 per cent.
“The major change there is that tourism was slightly weaker than we would have had at the end of September, so we will see that the rate of growth for tourism has fallen to 0.6 per cent itself and that largely explains the performance.
“Part of that is due to the softening of arrivals during the month of December and there was also some weakening of the cruise sector, although the cruise sector is relatively small in the overall scope of the assessment of the tourism sector,” Haynes said.
He said tourism output had fallen significantly by 1.6 percent from 2.2 per cent in 2017. This, he said, was due to the fact that the average length of stay had declined, despite long stay arrivals being 2.8 per cent higher than the previous year,
His initial forecast for 2019 was not much better.
“Over the past decade, the average rate of growth was -0.7 per cent. Revitalizing growth is therefore critical, but the forecast for 2019 is for growth to be flat. Tourism is expected to perform favorably due to an anticipated expansion of airlift, special events like the English cricket tour and an increase in ships docking at the port,” Haynes pointed out.
While he said activity would be supported by the thrust towards Barbados emerging as a hub for medical education, the Governor admitted that the need to sustain the fiscal consolidation effort could continue to dampen economic activity.
With several projects in the tourism, healthcare and distribution sectors scheduled to begin this year, Haynes said the commencement dates of those projects would influence the degree of expansion in the economy.
The Governor also revealed that the island’s foreign reserves continued to prosper and had increased by $576.3 million to $1.05 billion at the end of 2018, approximately 13.5 weeks of import cover.
He said the implementation of the Barbados Economic Recovery and Transformation (BERT) programme so far shown positive signs.
“So far progress has been encouraging and obviously what stands out is where we are in terms of our international reserves, both in gross terms and net terms . . . . We’ve seen a significant improvement in the fiscal performance and with the debt restructuring we have been able to bring the debt down and that I think is within the program’s limits,” Haynes said.
The Central Bank Governor noted that construction fell by an estimated seven per cent during the review period and activity in the other non-traded sectors including distribution, business and other services and transportation, storage and communication also declined.
Electricity consumption was flat, with homes and businesses increasing their reliance on solar power electricity generation.
The average unemployment rate for the four quarters ending September was 9.2 per cent, compared to 10.2 per cent in 2017.
However, Haynes said that figure was expected to rise as a result of layoffs in the public sector.
Public finances between April and December 2018 improved significantly due to the reduced interest costs associated with the suspension of commercial external debt payments and the lower interest rates on domestic Government securities.
Haynes said the government was still in the process of renegotiating with external creditors, to whom payments were suspended on June 1, 2018.
“It’s a process and we are negotiating in good faith with the external creditors and we hope to be able to arrive at a consensual position as soon as possible. We have to go through the process to make sure everyone is aligned and they understand our issues and we understand their issues and we are able to come to a position which ultimately will redound to the benefit of the Barbadian economy,” he said.
According to the Governor, revenues were $56 million below the target due to larger than anticipated tax refunds. Government provided $54 million in income tax and $18 million in value-added-tax.
The new fuel tax also realized $35 million during that period.
In his closing comments, Haynes said it would take a full-fledged effort from everyone involved to rescue the island’s economy.
“The road remains challenging. We’re not yet out of the woods. We’re making good progress but we have to keep focused and work together in order to achieve the objectives that we have set.
“Certainly from the bank’s perspective we believe that our objectives are achievable, but it requires everyone to put their hand to the plough in order for us to get where we want to get and that this time next year we will feel that we are in a much more comfortable position,” Governor Haynes concluded.