Predicting at least an 11.6 per cent economic decline for Barbados this year, the Inter-American Development Bank (IDB) is warning that Caribbean economies will need more aggressive fiscal actions to protect their productive assets.
In addition, the Washington-based institution is warning that countries will need to invest to ensure more sustainable growth in the future.
This was outlined in its third quarter 2020 Caribbean quarterly Bulletin titled A Pandemic Surge and Evolving Policy Responses.
In relation to Barbados, the IDB said “The economy contracted 14.9 per cent in the first semester of 2020 and is projected to decline at least 11.6 per cent by the end of the year.”
And it warned that the economic downturn resulting from the COVID-19 pandemic was “lengthening and deepening”.
The bank highlighted that both the traded and non-traded sectors were negatively affected by the closing of international borders, mobility restrictions, and reduced demand.
Additionally, the IDB pointed out that tourism output declined by more than 50 per cent in the first six months of 2020, reflecting an estimated 54 per cent decline in long-stay arrivals.
The IDB acknowledged Government’s response to the high unemployment rate by lengthening the time for severance payment application from 13 to 22 weeks, and the decision to seek and get approval from the International Monetary Fund (IMF) for a revision of fiscal targets under the Barbados Economic Recovery and Transformation Programme (BERT) due to worsening fiscal outlook.
Regarding the country’s reserves, the IDB pointed out: “International reserves remain adequate, primarily supported by borrowing form international institutions.”
It its assessment the IDB said the financial sector continued to be stable during the first half of this year, but warned that “the impact of COVID-19 on the sector is yet to take effect”.
“Loan deferrals and debt-payment moratoriums for individuals remain in place, which will delay the impact of COVID-19 on the financial sector,” it said.
In its latest report, the IDB officials also noted: “The authorities in Barbados have been effectively managing the COVID-19 health crisis.
“The Government of Barbados reacted swiftly upon registering the first cases of COVID-19 in March 2020,” it said, adding that the country had one of the highest testing rates in the region per 1,000 population.
The IDB highlighted that in response to the pandemic, Government had outlined a two-year economic stabilization programme to support businesses and households. It also pointed out that in addition to fiscal stimulus measures, authorities introduced a series of supported policies.
It is estimated that Government has spent just under $1 billion of its planned unprecedented $2 billion stimulus package for the next two years.