Despite anaemic growth for the first half of 2019, one of Government’s top economic advisors, Ambassador Clyde Mascoll, is confident that the Barbados economy will take-off in the latter half of this year.
Speaking at the Barbados Stock Exchange’s rebranding of its Junior Market to the Innovation and Growth Market at Savannah Hotel this morning, Mascoll explained that in just one year the Mia Mottley administration has restored the conditions necessary for growth.
“The combination of increased spending, especially in an environment where there has been more than an expression of investor confidence, I think it is fair to predict that in the second half of this year there would be an upward movement,” said Mascoll, who did not say by how much he expects the economy to grow.
Barbados has realised an average rate of growth of -0.7 per cent for the past decade.
However, Mascoll explained that with confidence already restored, the other ingredients for economic growth, which are consumption and investment, should be added when Government’s income tax relief measures take effect this month. He argued that the new-found spending capacity will be a major beacon to illuminate the country’s economic growth path.
“Barbadians seem hardly aware that starting this month there is going to be substantial tax relief. As of this month, a Barbadian earning $6250 will manage to save $350 and this is monthly relief. A Barbadian earning $10,000 will have $600 more in take-home pay. This is as a consequence of the change in the income tax structure. This is not anything to scoff at. In fact, this is the best tax relief in the history of Barbados,” said Mascoll, adding that this feat was especially impressive under an International Monetary Fund (IMF) programme.
He added, “There is no IMF programme that I have ever heard of that within the space of ten months, gave tax relief to anyone. One typically associates an IMF programme with fiscal austerity, which means Government is expected to extract more taxes from the system. But starting July, the Government has allocated income to repay all Barbadians the Income tax arrears due between 2011 and 2016.”
However, he made it clear that increased spending power alone was not going to do the trick, as some of Government’s other decisions, which have resulted in greater ease of doing business, coupled with a vibrant tourism sector, have all factored into his prediction.
“When you look at the fact that consumption is the sole end of production and what Government is doing to inject this type of income into the economy, I cannot see anything but an upward trajectory. This is added to the fact that tourism is doing well, plus Government has made it easier, through various legislations such as at Town and Country Planning, for persons to invest,” he said.
In underscoring the strength of the country’s fiscal position, the economist noted that Barbados’ debt to GDP ratio is now hovering at around 121 per cent, down from 170 per cent last year. The ambassador made it clear that the country’s fiscal position is strong and the concerns surrounding the wanton printing of money is now a thing of the past.
He also gave Government kudos for the stabilizing the foreign reserves, which now stand at $1.2 billion, up from $400 million when Government took office in May 2018. He argued that while some may look to diminish this accomplishment by suggesting that the reserves are being propped up by borrowed funds, such persons should be reminded that “Barbados was in no position to borrow money from anyone a year ago” until the current administration started to address the country’s fiscal position.