The Caribbean Development Bank (CDB) is predicting economic growth of one per cent for Barbados this year but it warns Government must stick to its stringent fiscal adjustment programme.
At the same time, President of the CDB Dr Warren Smith said the region is expected to grow at an average rate of 4.1 per cent in 2020, which he said was consistent with expectations of accelerated global economic activity.
This growth, he said, should be led by Guyana with its oil boom, buttressed by construction, tourism and agriculture in other economies.
“But economic growth will remain lopsided and below the sustainable rates needed for long-term resilience. Borrowing members like Barbados, Grenada, Jamaica and St Kitts and Nevis must stay on course with their homegrown socio-economic reform programmes,” Smith cautioned.
“Others should join the bandwagon and commence with alacrity, the implementation of their own adjustment programmes,” he said, while pointing out that the CDB would be continuing its own internal transformation programme which started last year in order to better assist borrowing members.
Looking back at 2019 while delivering the bank’s annual report for the year, Smith said borrowing member states recorded low growth averaging just about one per cent, compared to 1.6 per cent in 2018.
“This slowdown was consistent with relatively sluggish global growth of 2.9 per cent,” he said.
“The international economic environment continued to give mixed signals especially concerning USA/China trade relations. Geopolitical anxieties in the Middle East presented major downside risks whilst protests against corruption, inequality, climate change and lack of political freedoms were mounted,” said Smith.
While pointing to the modest improvement in the tourism industry, a fall in the debt to gross domestic product and fiscal deficit and improvement in Barbados’ credit ratings, Smith said the economy suffered from delays in major projects last year.
In spite of this he said, Barbados made “notable progress” in implementing its Barbados Economic Recovery and Transformation (BERT) plan.
Director of Economics Dr Justin Ram later told Barbados TODAY that the forecast of one per cent economic growth this year was based primarily on pending projects and continued adjustments on the part of Government.
“For Barbados we are forecasting a growth rate of one per cent. So that is quite an improvement on what has transpired in 2019. For the Barbados economy there was a contraction and that was to be expected because it was the first full year of the implementation of the BERT programme,” he said.
“BERT is still continuing, there is still fiscal consolidation, but what is good, because there has been the fiscal consolidation, investors now have greater confidence as it relates to Government policy. So we expect to see some uptick in construction activity as it relates to private investment perhaps in some hotel plant. This is some of the expectation that we have,” he explained.
The economy is estimated to have contracted by 0.1 per cent last year, and the Central Bank of Barbados is estimating an optimistic growth rate of between 1.25 per cent and 1.75 per cent this year, also based mainly on planned private sector projects.
Ram said looking at the data the CDB understood the consequences of homegrown adjustment programmes. “We looked at the situation in Barbados. What are the likely reforms that still need to happen? What are the projects that are likely to come on stream in 2020, and I think our forecast is in line with the data we currently have.
“All I can say is if there are upside risks to that forecast that is a good thing. We would be very happy for our forecast to turn out to be lower than the actual. But at the moment it is really based on the information that we currently have, where we see the projects in the pipeline and which ones are likely to start and when, and also with respect to the reform the Government still needs to implement,” he further explained.
“We are encouraging the Government to implement doing business reforms because we really need to start growing that GDP and it needs to be led more by the private sector.” Ram added.
Pointing to the increase in infrastructure development, he reminded that the CDB was funding the upgrade of the runway of the Grantley Adams International Airport, and has already approved funding for the planned south coast sewerage upgrade, which officials are hoping to begin this year.
The CDB is also expected to inject roughly $60 million in the upgrade of its headquarters here in Barbados, beginning towards the end of this year.
The bank said this year it would be working closer with member states to tackle issues relating to climate change, and to expand the blue economy and the renewable energy sector.
During the press conference at the CDB’s Wildey, St Michael offices on Tuesday, officials also urged member states to tackle the issue of crime and violence and do what they could to improve conditions for the micro, small and medium-sized enterprises sector.