Agriculture saves the day in 2020

by Marlon Madden

Only the agriculture sector improved in performance in Barbados during 2020, as all other sectors declined due to pressure from the effects of the COVID-19 pandemic.

Unlike the rest of the economy, agriculture output was 1.9 per cent higher than in 2019, with the main source of growth being as a result of higher food crop production, according to the latest Central Bank of Barbados report.

However, the report, which was presented recently by Central Bank Governor Cleviston Haynes, showed that chicken production contracted as tourism and local demand were depressed, while milk production suffered from heat related stress and a deterioration in grazing pasture conditions.

The sugar industry was said to contribute some $4.2 million to the island’s gross domestic product (GDP) last year, compared to $4 million a year prior, while non-sugar agriculture contribution increased by $1.9 million, to reach $111.7 million of GDP last year.

“The spill-over effects of the downturn in tourism was especially felt in the wholesale and retail and business services sectors, including real estate, car rentals and the ancillary services provided to the tourist industry,” said Haynes.

There were also declines across the entire manufacturing sector.

Haynes said reduced activity during the lockdown period and lower demand arising from wthe fall in incomes, were largely responsible for the sharp declines.

While there was a modest pick-up in visitor arrivals during the fourth quarter of 2020 as airlift improved and more hotels reopened after their closure in April, there was a 90 per cent fall in long-stay visitor arrivals over the last three quarters, which resulted in an overall 71 per cent decline for the year.

The cruise sector was also depressed and passenger arrivals were also lower by 64 per cent.

“The uncertainty related to the pandemic contained new private sector investment, particularly in the tourism sector. As a result, construction activity declined by over 3 per cent, despite implementation of public and private sector projects such as the Harrison’s Point Isolation Facility, the repaving of the Grantley Adams Airport runway, the resumption of the Sandals expansion and Ocean Two Resort,” added Haynes.

Overall economic activity declined by 17.6 per cent during 2020.

In relation to the financial services sector, there were elevated risks due to the sharp economic downturn experienced last year. However, the local mortgage market remained stable with only marginal growth in the credit union sector and almost half of the reduction in household debt was attributable to lower credit card indebtedness.

“During the last three quarters of the year, financial institutions, banks and non-banks, implemented varied programmes of payment moratoria to minimize the risk of default. Nonetheless, the nonperforming loans ratio rose moderately and profitability declined in the face of increased provisions, weak credit demand and falling loan rates,” said Haynes.

“However, commercial banks remained well capitalised and highly liquid. Activity on the interbank market remained modest and neither the banks nor the smaller deposit-taking institutions had to rely on central bank liquidity support following the Bank’s decision to reduce the securities ratio and the discount rate to help ease the impact of the pandemic,” he added.

Credit to the non-financial private sector by deposit-taking institutions maintained a downward trajectory, falling by 1.5 per cent from 2019. The contraction was concentrated in the banking sector, where increased lending to utilities was offset by reductions elsewhere, particularly the household sector ($64.5million).

“Net lending to tourism was down in the first quarter, influenced by the early repayment of a large loan. However, this was followed by a modest pick-up in borrowing by the sector during the final nine months of 2020,” added Haynes.

The Central Bank report showed that new lending for the April to December period was lower than in 2019, but lower repayments resulting from the moratorium of payments during the year dampened the decline in loans.

“Loans subject to moratoria declined from $2.6 billion in May to $0.3 billion at December 2020. As financial institutions rolled back the moratoria, some loans were restructured on a case-by-case basis in an effort to provide manageable repayment programmes for customers,” the report added.

Deposits rose by 5.4 per cent during 2020, reflecting increases in domestic-currency and foreign-currency deposits of 5.4 per cent and 6 per cent, respectively.