Joblessness rises to 13.6%, FX reserves dip, hotel stays plummet

Barbados is in full recession, passing its fourth straight quarter of an economy in double-digit retreat, with January to March showing a staggering near 20 per cent shrinkage in economic activity, Governor of the Central Bank of Barbados Cleviston Haynes reported Thursday.

Added to the gloomy disclosure from the central bank was the report that most hotels remain closed, as occupancy plunged to a mere 22 per cent, a direct result of the COVID-19 pandemic.

A recession is generally defined by two successive quarters of falling economic activity and shrinkage of the Gross Domestic Product (GDP).

But even as Haynes predicted possibly a one to three per cent growth rate in the economy this year, he reminded Barbadians that the situation remains extremely fluid, and much will depend on a resurgence in tourism, recovery of international air travel, and a robust COVID-19 vaccination process in the country’s key source markets for visitors.

Haynes said: “The bank anticipates that following the sharp decline in economic activity last year, the Barbados economy will make a modest recovery.

“The eventual outturn for 2021 will be influenced in large measure by the country’s ability to contain domestic spread of the virus and by the timing and pace of resumption of the activity in the tourism sector.”

In his first economic review for the year, Haynes disclosed: “Tourist arrivals plummeted on account of the unfavourable environment for travel. The weakened tourism sector, together with fallout in other economic activities, and depressed private spending, contributed to a 19.8 per cent collapse in economic output.

“Tourism output plunged by an estimated 96 per cent. The mild upturn in visitors registered in the fourth quarter of 2020, was reversed with arrivals for the quarter [January to March 2021] being half of those for December [2020] alone.”

At the same time, he offered hope for tourism’s improvement as “pent up travel demand supports the outlook for the eventual post-COVID recovery”.

But unemployment remains “elevated” at 13.6 per cent, the governor said, even as he noted that some of the thousands of tourism workers who lost their jobs were re-employed as a result of Government’s BEST programme.

The Barbados Employment and Sustainability Transformation (BEST) programme, which facilitates re-engagement of tourism workers, property renovation and development, led to some 2,100 workers returning to the industry.

But about 6,000 workers across various sectors applied for jobless benefits from the National Insurance Scheme (NIS).

The country’s international reserves, on which Government is depending to help prop up the economy during the economic shock, declined by $86 million during the January to March quarter, though it still stands at $2.6 billion or 43 weeks of import cover.

Governor Haynes said: “Government suffered a revenue loss of $416 million or five per cent of GDP for the financial year 2020-2021, largely the result of the impact of COVID and discreet policy changes.”

He explained that transaction-based taxes that included the value-added tax (VAT), “were especially hard-hit, declining by $498 million”. VAT accounted for more than half of that loss, the Central Bank boss reported.

Even in the pandemic, though, the state was able to increase its tax collection on incomes and investments, which jumped by $119 million. Thanks largely to the international business sector, there was a near doubling of corporation taxes which rose sharply by $304 million.

COVID-19 has been a severe damper of almost every aspect of economic life on the island and caused Government to spend $166 million to manage the health and economic crisis.

And after making great strides in reducing public debt prior to the onset of the COVID-19 pandemic, the Governor revealed that at the end of March, the island’s outstanding debt was $12.92 billion compared to $12.38 billion at the end of the last financial year. This puts it at 153 per cent of GDP.
(IMC1)