Barbados-born economist Carlos Forte has welcomed the progress being made by Government to cut its expenditure and rake in more revenue.
However, he has warned of the need for more local and international investment in an effort to grow the still struggling economy.
Forte, who was reacting to the latest Central Bank report, told Barbados TODAY it was also critical that Government concludes external debt restructuring negotiations as soon as possible.
“I think what is needed now to grow on the successes of fiscal consolidation is to have investment, and that investment would usher in the type of sustainable growth that the country is so desperately looking forward to,” said the Canada-based Forte.
“Progress is being made and that is great, particularly where the epicenter of the problem was concerned because we found ourselves as a nation in a position where we had a genuine debt crisis. A lot has been achieved so far to alleviate that position. There is still more to be done with respect to the foreign component of the debt and beyond that the critical thing now is how do we get the economy growing,” he said.
In his half-year review, Governor of the Central Bank Cleviston Haynes indicated that Government’s ongoing fiscal reforms contributed significantly to the good performance in government finances for the period.
He reported that the overall fiscal surplus and the primary balance were estimated at 1.7 per cent of gross domestic product (GDP) and 2.4 per cent of GDP, respectively.
Haynes also reported that the tourism industry performed well and international reserves reached 15.3 weeks of import cover or $1.2 billion at the end of June, while revenue climbed 7.9 per cent to $725.6 million, compared to the same period last year.
However, with unemployment still at double digits at 10.1 per cent, a decline in several sectors including agriculture, and economic growth contracting by an estimated 0.2 per cent for the period, Forte described the report as a “mixed” bag.
“Progress has been made, but there is still a lot of work to be done,” he said, while pointing out that the debt restructuring was necessary.
The economist said the question to be answered now was: “How do we increase investment both for local and foreign investment so that we can see some growth in the economy again, and unemployment being put on a downward trajectory?”
Of concern to Forte is the length of time it is taking Government to reach a deal with its US-currency debt holders.
He explained that protracted negotiations could lead to diminished appetite for government paper in the future.
Additionally, Forte said the longer it took Government to reach a deal, the longer it would take for the country’s credit ratings to improve and this could make Barbados seem less attractive for foreign investors.
“The critical thing that is needed as borne out in the Central Bank’s report last week is that Barbados is in need of a large amount of foreign direct investment. It will need a significant amount of local investment as well,” said Forte.
Nevertheless, with Government now experiencing ease from having one of the highest debts in the world and a widening fiscal deficit, Forte said things appeared to be heading in the right direction.
He is optimistic that Government will be able to achieve its ambitious target of six per cent primary surplus by next year, adding that he was confident the Mia Mottley administration seemed willing to implement additional adjustments if needed.
“So far they have been meeting the target. I have every confidence that they will continue to do so. One of the good things about being in an IMF (International Monetary Fund) programme is that it holds the government to that kind of fiscal discipline.
“They have demonstrated that they are toeing the line so far and I am thinking that whatever additional adjustments that may be needed to achieve those targets I have every confidence that the Government will make those adjustments,” he said.
Meanwhile, regional economist Marla Dukharan told Barbados TODAY the economy has been brought back from the brink and this was evident by the rising level of foreign reserves and overall BERT program targets being met.
“The Government and all those involved deserve to be congratulated. The external debt restructuring has taken longer than expected but I believe the authorities are doing all they can to close that chapter as soon as possible, within reasonable parameters,” she said.
“I believe the Government will continue to meet its primary surplus and debt targets as outlined in the BERT program,” she added.
Dukharan also pointed to the need for inclusive growth as the next critical step for the Barbados economy.
“Transforming the economy to generate sustainable and equitable growth, and building resilience – fiscally and otherwise – are the next most important tasks for this administration, in my view,” she said.