The Barbados economy is showing major signs of improvement in several areas though economic growth continues to lag.
For the first six months of the year government revenue was healthy with an increase of 7.9 per cent to reach $725.6 million, compared to the $672.4 million recorded for the same period last year.
Additionally, the international reserves almost tripled what it was a year ago to reach $1.2 billion or 15.3 weeks of import cover by the end of June.
Government’s ongoing fiscal reforms also contributed favourably to the period under review, with the overall fiscal surplus and the primary balance estimated at 1.7 per cent of gross domestic product (GDP) and 2.4 per cent of GDP, respectively.
This is the best performance realized in any comparable quarter over the past 30 years, indicating that Government was moving even closer to achieving its ambitious target of a primary surplus of six per cent of GDP by the end of the current fiscal year.
Delivering the economic review at the Central Bank’s Bridgetown headquarters on Friday, Governor Cleviston Haynes also reported that the island’s bread and butter tourism industry witnessed a 3.9 per cent increase during the period under review.
“The outlook for the Barbados economy has become more favourable over the past 12 months,” said Haynes.
Besides higher levels of seating capacity and various entertainment events during the period, which boosted overall tourism performance for the year, Haynes also pointed out that improved access to foreign exchange reflected an increase in tourism earnings, which resulted from higher arrivals and higher average daily hotel room rates.
In relation to Government’s efforts to reduce its deficit and debt, Haynes said by far the most significant contributor has been reduced spending, a large portion of which came as a result of interest savings from the domestic debt exchange and suspension of commercial external debt payments.
This, he said, accounted for 80 per cent of the $164 million fall in current expenditure.
Current transfers to public institutions also contracted during the period as some government agencies are now directly funded by measures outlined in the Budget.
However, as at the end of June, the country’s debt to GDP ratio stood at approximately 124.2 per cent, as discussions with external creditors on the debt restructuring continues.
In relation to economic growth, Haynes said: “Preliminary data suggests that, as expected, economic growth during the first half of the year lagged improvements elsewhere in the economy.
“The impact of fiscal consolidation on demand together with weaker than desired investment offset the gains from a robust tourism performance, resulting in a modest contraction of an estimated 0.2 per cent in economic activity, over the course of the first six months of 2019,” he said.
He added “Layoffs in the public sector, as part of the adjustment effort, together with the weakness in the construction sector contributed to higher unemployment when compared to the same period in 2018.”
Unemployment was estimated at 10.1 per cent, compared to the average 8.2 per cent for the same period last year.
The agriculture sector also saw a decline, with output dropping by about eight per cent during the review period.
Haynes said while the success so far in repairing the macroeconomic imbalances has been based on “unwavering” fiscal discipline, maintaining this commitment remains paramount as Government seeks to reassure investors of its commitment to sustain adjustment efforts.
“Indications are that investor confidence is returning, but as expected, economic activity for 2019 has been sluggish. Growth from the tourism sector has buoyed economic activity, but faster project implementation is required to push growth above the forecasted range of 0 per cent to 0.25 per cent [this year],” he said.
Looking even further ahead, Haynes said with the strengthening of the macroeconomic environment, an anticipated further pick-up in tourism and an acceleration of investments, the current forecast for 2020 “is in the range of 0.75 per cent and 1.25 per cent”.
The Governor said he was eager to see some construction projects started that could further improve economic growth prospects for next year.
He warned that with trade tensions, ongoing Brexit negotiations, uncertainty linked to geopolitical tensions in the Gulf, and volatility in oil prices, Barbados’ economy remains sensitive.
“Despite these risks, the Central Bank believes the economy is moving in the right direction. Adjustment is seldom easy but the effort is required to safeguard our standard of living. Let us continue to work together to achieve our mission,” said Haynes.