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Economist warns of potential decline in UK tourists

by Marlon Madden
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Noted economist Marla Dukharan has forecast a dampening of local economic activity this year due to rising food and energy prices, as well as a fall-off in visitor arrivals out of its main source market, the United Kingdom (UK).

In her June 2022 Caribbean Economic Report, Dukharan noted that inflation in Barbados stood at 4.2 per cent in March 2022, and warned that “rising food and energy prices will create further pressures domestically and could dampen domestic economic activity”.

While the Government expects the tourism sector to contribute to a primary surplus, Dukharan suggested that could be an uphill battle given rising inflation in the UK.

“For financial year 2022/23, Government is targeting a primary surplus of one per cent of GDP, with revenue projections based on a continued recovery in tourism. Tourism arrivals for quarter one 2022 reached 55 per cent of 2019 levels. The UK supplied 51 per cent of tourists, but the Bank of England’s recent forecast for 11 per cent inflation by October could soften UK arrivals,” said the economist.

For the first three months of 2022, the UK provided some 58,880 long-stay visitors to Barbados.

The Barbados economy grew by 11.8 per cent in the first quarter of this year and Dukharan pointed to several positive signs during the quarter, including strong results from the manufacturing sector, which surpassed that of 2019 and 2020 levels for the same review period.

However, she indicated that while construction continued to recover during the first three months of this year, the pace of execution of major projects will continue to determine the 2022 outlook.

The economic consultant also recalled that international reserves remained strong during the first three months of this year at US$1.29 billion, though the growth in the reserves was mainly due to multilateral inflows and external borrowing.

However, she suggested that rising inflation could result in a change in fortune for some fiscal targets.

In her economic letter, Dukharan also pointed out that the Caribbean continued to struggle with “irrelevant and bloated institutions”, and suggested that countries learn from the example of Cayman Enterprise City, an investment promotion agency in the Cayman Islands, to address this challenge.

“Cayman Enterprise City (CEC) is a perfect example of an institution created not by the Government but by the private sector, which contributes to broad socio-economic development, economic diversification, and growth in meaningful and lasting ways. This is exactly the kind of institution that every country in the Caribbean needs if we are to cement ourselves on a path of sustainable socio-economic progress,” she said.

CEC has achieved an economic impact of about US$662 million for the Cayman Islands over the past decade.

“CEC has improved the competitiveness of the Cayman Islands and is now home to the largest innovation ecosystem in the region,” noted Dukharan.

“Importantly, CEC does not rely on government funding and is a purely private initiative. Additionally, CEC supports a strong economic and business framework and progressive ecosystem without posing additional administrative burdens on Government.”

In 2021, total government revenues from CEC amounted to US$5.3 million, bringing the total since inception (2011- 2021) to US$23.17 million, she reported.
marlonmadden@barbadostoday.bb

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