WASHINGTON – Despite forecasting that the economy will shrink again this year, the International Monetary Fund (IMF) has told Barbados TODAY it’s convinced that the economy is now on a “sounder footing”.
The IMF is predicting a -0.1 per cent decline in the Barbados economy this year, likely to be the worst performance in the region, before bumping up to 0.6 per cent next year.
Deputy Director of the Western Hemisphere Department of the IMF Aasim Husain told Barbados TODAY the country’s position, compared to a year ago, is vastly different and from all indications is going in the right direction.
Recalling that Barbados had one of the highest debt levels in the world and precariously low levels of reserves, Husain said after entering a near-$600 million (US$290 million) Extended Fund Facility with the IMF last year, the country had already seen off a number of weaknesses in the economy.
“Our forecast for the moment for this year is just slightly negative growth of -0.1 per cent. So, basically, flat. But that marks a recovery from the past. And I think part of that is the start of new policies that are putting the economy on a sounder footing,” Husain said.
Pointing to the more than doubling of the reserves from a mere six weeks of import or $410 million at the end of December 2017 to approximately $1 billion as at the end of last year, the IMF economist said he was also pleased to see public debt on a downward trajectory.
“So, we hope that in future years, growth will also return.
“The big, headline going in to the (IMF) programme had been the very high level of public debt -160 per cent of GDP – and very low level of reserves. Those two issues are being addressed under the programme. That is in the process of being restructured.
“The bulk of public debt, which is the domestic part, has already been restructured, and negotiations with external creditors are underway.
“With this in process, fiscal consolidation underway as well and deep structural reforms also being undertaken, the economy is on sounder footing.”
The IMF’s director of the Western Hemisphere section Alejandro Werner, told Barbados TODAY he was upbeat about the economic prospects for the Caribbean this year and going forward.
He said the overall positive growth started some three years ago “on the back of an important resumption of tourism”, it and should be sustained.
He also pointed to the level of investment in some parts of the region as well as commodity exports, which he said were bouncing back.
Werner said: “We have seen that most of these countries have already absorbed the significant declining income coming from commodities after the declining commodity prices, and now all of them are coming back to growth.
“Obviously, the Caribbean continues to be a region within Latin America that is also exhibiting, not sufficient growth to satisfy the amount of the population and the needed increases in social indicators.”
He also pointed out that a number of regional economies were still struggling to manage high levels of debt.
Werner also acknowledged that the region remained exposed to natural disasters and other external shocks, which could grossly impact its positive outlook and leave economies with heavy financial burdens for several years.
He added: “So, we are developing financial frameworks for countries to manage financial implications of natural disasters in a much more effective way.
“We’re also trying to advocate for much more ex ante (before the event) financial support for these countries instead of ex post after the natural disaster has hit so that these countries are better able to manage the risk and are in a better position to invest in natural disaster resilient infrastructure.
“That is what our teams are working with many countries in the region, but obviously, it’s a work in progress.” (MM)