The economy is projected to grow between one and two per cent of gross domestic product (GDP), a slightly slower pace than the Central Bank of Barbados had earlier forecast while the bank stressed that growth hinges on a continued recovery of tourism.
The financial institution previously predicted growth of up to three per cent for this year.
For the first nine months of the year, the economy declined by 3.2 per cent, though growth of 10 per cent was recorded for the July to September quarter, when compared year on year, said Governor of the Central Bank Cleviston Haynes in the latest economic review for the first nine months of the year.
Stressing the need for improved COVID-19 vaccination and growth in the tourism industry, Haynes said: “The forecast for growth this year and next remains sensitive to the overall outturn for tourism.
“The bank has narrowed its forecast for growth within the range of one per cent and two per cent, while the outlook for 2022 is for growth ranging between seven per cent and nine per cent.”
Haynes declared that “everything will be critical as it relates to tourism . . . whether or not you agree on tourism being the focal point in the economy, the fact is that it is”.
The central bank governor said that the risks to the growth forecasts remain significant owing to the impact of the contagious Delta variant of the COVID-19 virus and the slower than anticipated vaccine rollout, caused in part by vaccine hesitancy.
He said: “It is clear that a speedier recovery from this pandemic requires us to continue our efforts to contain the spread, including through accelerated vaccination rates. This should assist in minimizing infections and increase confidence among visitors and locals alike about their safety.”
He maintained that the upside to having more people vaccinated against the pandemic included longer business hours, increased productivity and reduced downtime associated with testing and contact tracing, revival of small businesses, accelerated job creation and the “normalisation” of educational services.
“In addition, the favourable impact on foreign exchange earnings, government revenues and spending and the overall quality of life cannot be overstated,” he added.
He also warned that over the medium term, further development of the economy is dependent on the revival of stalled tourism projects along with new private sector investments, including in the renewable energy sector and the embracing of technology for innovation and process improvements.
“In addition, Government needs to accelerate public sector projects and facilitate the ease of doing business through timely and efficient delivery of their goods and services,” said Haynes.
“The outlook for growth, fiscal consolidation and reserve adequacy signalled a gradual and sustainable recovery. However, it requires all of us to play our part. The critical first step is ours to contain the spread of the virus so that we can unleash the potential of the economy.”
Haynes was careful not to say the country was on its way out of the prolonged recession, despite the lower unemployment rate and two consecutive months of economic growth.
He explained: “What we want to be able to do is get back to levels that are closer to where we were in 2019 and be able to grow. So yes, the economy is growing, but it is growing from what is an essentially low base that we did not do to get ourselves there. It is not policy induced.
“Therefore, I don’t want to use the words we are out of a recession, but the economy is recovering and tourism is on its way back but we still have a long way to go to be where we want to be before we start to have discussions about recessions and out of recession.”
At the end of September, foreign exchange reserves stood at just over $2.87 billion or 42 weeks of imports, boosted by borrowing from multilateral lending agencies in the amount of $249 million, as well as an injection of $261.6 million from the International Monetary Fund (IMF) through its allocation of Special Drawing Rights (SDRs) to members.
Government debt rose slightly to reach 145.8 per cent of GDP at the end of September or $13.047 billion, compared to 131.9 per cent of GDP or $12.426 billion a year prior.
Haynes pointed out that the combined efforts of strong growth and a return to primary surplus over the medium term were needed to enable Government to achieve its debt target of 60 per cent of GDP.
Government’s overall revenue increased by a marginal three per cent between April and September to reach $1.304 billion, as taxes on consumption improved from the previous year.
Receipts from Value Added Tax (VAT) rose by some $72 million, excise taxes grew by $21 million, and revenue from the foreign exchange fee accounted for almost half of the enhanced uptake from non-tax revenues, which expanded by $17.8 million, the central bank said.
Government spending jumped some 15 per cent, due primarily to rising spending related to the COVID-19 pandemic and recent unexpected climatic events.
Current spending for the April to September period stood at $1.327 billion.
For the year up to September, Government spent around $124.9 million or 1.3 per cent of GDP to address matters relating to the pandemic. It is estimated that Government will spend some $319.7 million or 3.2 per cent of GDP addressing the pandemic for the current financial year.
Last financial year, a total of around $209.1 million was spent addressing the COVID-19 pandemic.
Government’s spending on transfers to public institutions, goods and services and wages and salaries also increased, with the majority (63 per cent) going to public institutions including the Queen Elizabeth Hospital and the National Insurance Scheme.
Haynes added: “Spending on wages and salaries rose by $11 million as more persons were employed primarily in a temporary capacity to assist with the management of the pandemic and the response to the climate events. Other notable current outlays were related to grants to individuals on account of spending on tuition, welfare and the household survival programme and a temporary subsidy to poultry producers.”