The Central Bank’s latest economic report has received contrasting reviews ranging from it having no relationship to the realities faced by Barbadians to questions surrounding the platform on which growth will be built.
On Wednesday, bank governor Cleviston Haynes – in his second quarter review of the economy – announced that the country had started to come out of recession as evidenced by a 5.5 per cent growth in economic activity during the April to June period.
And while maintaining his forecast for a modest growth rate of between one and three per cent for this year, he said the second quarter growth rate was weaker than expected.
At the same time, the governor, who is pinning a lot of the local recovery on a return to a vibrant tourism sector, contended that vaccination would be a major factor in that process.
In his response, President of the Barbados Economic Society (BES) Simon Naitram said on Thursday that the Central Bank report is a cause for reflection.
“This time last year, we all hoped the pandemic might be over by the end of 2020, and that 2021 would just be a snap back to normalcy. But we’re only just seeing the first small signs of a recovery. It’s now clear that this isn’t going to be a swift and easy recovery—the pandemic won’t simply disappear one day. The recovery will be slow, and in the words of the Governor, the best we can hope for over the coming year is strong, but gradual,” Naitram told Barbados TODAY.
“One insight from the Governor’s report is that we are now at the stage of building a platform far beyond the pandemic. How we choose to build that platform determines whether the recovery is fair and sustainable over the next two to five years,” the economist added.
He suggested that the increasing frequency of natural disasters such as the pandemic, the La Soufriere volcanic eruption and Hurricane Elsa, requires the country to build a more resilient society.
“Resilience requires greater investment in the NIS, in healthcare, in education, in childcare, in public housing, in public transport [and] in welfare,” Naitram pointed out.
The spokesman for the economic community said the need for public investment makes the Government’s fiscal position more difficult.
“Loosening its budget slightly means the Government will reach its debt target of 60 per cent of GDP later than originally planned, but there is no doubt the moment demands increased spending,” he declared.
But particularly heavy criticism came from the Democratic Labour Party (DLP) through its president Verla De Peiza.
“The statistics of the most recent Central Bank report bear absolutely no relation to the reality faced by many Barbadians today. It is meaningless to the average Barbadian to report growth of 5.5 per cent in the economy without stressing that this is when compared to the previous period and/or the same period of last year. Because that is the only context within which it makes sense and we know 5.5 per cent over nothing is really no growth,” De Peiza argued.
“The scale of the economic recession we now are in, belies the statistics. It has taken an enormous toll on households, on businesses, on jobs and opportunities. This is compounded by this government’s failure to care and mitigate these outcomes by creating a safety net for its people. Why has there been no extended access to unemployment benefits? This was done by the former DLP administration with less resources than what this current Government continually boasts of. Why have there been no holistic measures to cushion the impact of rising prices in the market?” the DLP leader asked.
“What makes matters even worse is this government’s failure to honour its promise to workers to secure their severance payments. Hundreds still cannot get from their former employers,” De Peiza stated.
She suggested that all of these issues can be addressed “ably” through the presentation of a budget.
She believes the country needs a clear policy plan which would provide direction for a planned recovery, as opposed to the current perception of government “holding its breath” while waiting for tourism to take a breath.
“It would also set out a roadmap for the diversification of the economy, particularly as it relates to agriculture, which ought not to be allowed to flounder at so critical a juncture in our history. To be clear: the Democratic Labour Party calls on the Mottley administration to present a budget to the nation as a matter of urgency. Show the people you care with a clear plan that it is not just an empty slogan, the DLP president concluded.
In his response, Chairman of the Barbados Private Sector Association (BPSA) Edward Clarke told Barbados TODAY the pronouncements by Governor Haynes were no surprise to him.
“I think we all know that the economy is starting to pick back up slowly in the last couple months. Certainly, the first quarter of the calendar year was very, very weak due to a lack of tourism. What has picked up is still quite a slow progress and no major progress has been made in the economy yet,” Clarke said.
He agrees with the Central Bank Governor that the vaccination programme is going to play a big part in how the country succeeds going forward.
“It is important that people understand that the economy is very dependent on tourism and what we do in Barbados in the next couple of months…the next three months or so, is going to make a huge difference to our success for attracting visitors back…how we manage our health situation, how we manage the COVID crisis and how we manage our own vaccination programme in order to retain our status in the European market, our green status with the UK market and ensure that we can welcome back the North American numbers,” the private association head said.
He noted that while this country needs to diversify its economy, it is not something which can be achieved immediately.
“A lot depends on tourism rebound and we certainly look forward to being able to welcome our visitors in the next few months to Barbados and in the last quarter of the calendar year or the third quarter of the fiscal year because the bookings look pretty good from what the experts are saying. It is looking a bit more optimistic…it is certainly nowhere near where we want to be, but there is some optimism there than where we are at this time,” Clarke declared.
While he does not see any pickup in growth during the current quarter due to the absence of Crop Over activities, he is forecasting better things in the final quarter.
For Opposition Leader Bishop Joseph Atherley, one of the major aspects of the Central Bank Governor’s report was moving the timeline set for achieving debt sustainability of 60 per cent of GDP from financial year 2033/2034 to 2035/2036.
“My question was really is that indicative of an intention on the part of government either to extend the current IMF (International Monetary Fund) arrangements or to enter into a new arrangement with the IMF? I think if that’s the case, that needs to be made clear before the people of Barbados vote again at the next elections slated for 2023,” Bishop Atherley stated.
The Opposition Leader noted that the premise on which Barbados entered into the contract with the IMF was to be able to access funding from the various other financial lending institutions.
“You also would realize that we have not been able to access international private capital markets because of the economic position the country has been in. The arrangement with the IMF has helped us to achieve access funding from the institutional entities. My question is, would we want to prolong the arrangement with the IMF to bring us again where we can also access funding from international private capital markets?” he queried.
Bishop Atherley told Barbados TODAY, also noteworthy for him was the Governor’s reference to the fact that the country’s worsening debt to GDP profile had risen to 150 per cent.
“That worsening debt to GDP ratio has been caused, not so much by the borrowings that we have entered into, but by the actual reduction in GDP itself because of the downturn in economic activity. So therefore by inference, we would have to realise growth in Barbados to see our GDP moving upward…and that profile of debt to GDP ratio being properly addressed,” the Opposition Leader suggested.
“The question therefore arises out of that is what platforms of growth are being constructed; whether they are publicly constructed platforms or privately constructed platforms. The Governor was a little lukewarm in his anticipation for investment coming into Barbados going forward. I think he also lamented the continued high level of liquidity in the banking system, which itself would be suggesting an absence of domestic consumption and domestic investment,” Bishop Atherley contended.
He also observed that the Central Bank Governor’s projections for growth and employment and an uptake in economic activity were also unenthusiastic in the current context of uncertainty.
In his review, the Central Banker reported that while there were some broad-based increases in revenue, total revenue declined by some two per cent or $122 million to reach 7.6 per cent of GDP, while expenditure rose by $27 million to reach 6.9 per cent of GDP at the end of June. ([email protected])