#BTColumn – The economy: clouds and silver linings

Disclaimer: The views and opinions expressed by this author are their own and do not represent the official position of the Barbados Today.

by Ralph Jemmott

Even the most cheerful optimist must be conscious of the economic clouds that are currently hanging over Barbados, the region and much of the Western capitalist world. Of the world’s major economies, only China is expected to show significant GDP growth in 2020, at an estimated rate of four per cent. The US economy is expected to contract by four per cent in 2020, the Eurozone’s by as much as eight per cent.

The clouds hanging directly over Barbados are quite dark. In his third quarter economic review, the Governor of Barbados’ Central Bank calculated that output fell by 16 per cent over the period January to the end of September 2020.

While the overall slide for this year is expected to be in the double digits, the ostensibly silver lining is that the Bank expects the local economy to ‘rebound gradually’ in calendar year 2021.

One eminent English poet claimed that “Hope springs eternal.” Despair is a terrible thing, but as Dr Jill Biden said in defence of her husband’s candidacy, “Faith sees better in the darkness.”

However, reality is what it is. Barack Obama once said that if you ignore reality, it can come back to bite you. This is not the time for wishful thinking and easy certainties. Who would have thought on January 1st 2020 that the world would be mired in a global pandemic with the dire health and economic consequences that we are witnessing.

The IMF has optimistically predicted that the Barbados economy could grow by as much as 7.4 per cent in 2021, a figure which the Central Bank does not consider ‘unreasonable.’ In fact, its Governor suggests that growth could be as high as 10 per cent next year, if, “everything goes in Barbados’ favour.”

One University of the West Indies professor has rightly pointed out that a rise of seven per cent after a decline of 17 per cent would still put the local economy down some ten per cent over calendar year 2019.

He, however, did not rule out a recovery seeing that the slowdown after February was ‘artificial,’ caused by the COVID-19 pandemic and the resulting shutdown. The expectation must be that the COVID threat will cease sooner rather than later.     

Optimistic projections for the Barbadian economy have invariably focused on the tourism industry, which has been the main engine of growth. The focus has been on proposed start-up projects in that sector.

However, as Denis Johnson noted on the Thursday 29th edition of Brass Tacks, such start-ups have been either not in evidence or very slow in coming, e.g. the Four Season’s
non-event, the delayed Sam Lord’s Castle venture or the slow paced Hyatt on lower Bay Street.

In September, the then head of the private sector body lamented the tardiness with which projects deemed essential to economic growth were getting off the ground.

The present administration, like its predecessor, appears to be having difficulties getting projects implemented. The reality may be that investors are reluctant to build plant while the tourism market remains weak.

The current tourism minister is hoping for a return to a 40 per cent hotel occupancy rate in the coming tourist season. There are some positive signifiers, such as the Barbados Welcome Stamp initiative and the return of major passenger carriers.

A 40 per cent occupancy rate would constitute a good start to a recovery, but as Professor Michael Howard has written, we would need an occupancy rate of about 60 per cent to guarantee substantive viability.

However, the so-called ‘externalities’ do not at present portend a hasty recovery for the tourism sector and consequently for the overall economy. Much in the global market is assuredly not in our favour.

Our major tourist markets in Britain, Europe, the United States and Canada are bracing themselves for a second wave of the COVID-19 pandemic.

On October 30, US cases reached 9 million and deaths just before the November 3rd elections stood at 233,000. In Britain, Boris Johnson announced a month long lockdown for England starting Thursday, November 5. Germany’s Angela Merkel has warned of ‘a long hard winter,’ as that country returns to lockdown from Monday, November 2.

Barbados needs to jump-start its economy. Getting the (BEST) programme underway, getting the hotels reopened, getting the restaurants reopened is very important. However, if it opens its tourism doors too soon and too wide, we may face the kind of intolerable health dangers that we have so far avoided.

Apart from the ‘externalities’, there are internal factors, (the two are obviously related) that cloud the atmosphere and to which there is only a trace of a silver lining. One such is unemployment.

The Review of Barbados’ Economic Performance, January to September, did not give the current unemployment figures, but it did note that between late March and September, unemployment claims reached 32,000. The Governor himself warned that if the recession is prolonged, a number of people could become unemployable. Perish the thought.

Government has taken on many highly paid consultants, ostensibly hired because of the quantitative and qualitative enormity of the challenges it faces.

It must now assure us that not only can it get things done, but that it can get them done right. Failing that, in the ‘effluvium’ of time, everything may appear to be illusion and spectacle, symbolism and public relations.

Ralph Jemmott is a respected retired educator.