The Barbados economy is projected to grow by about 5.9 per cent this year, according to data released by the Economic Commission for Latin America and the Caribbean (ECLAC) on Tuesday.
In a new edition of its flagship annual report, Economic Survey of Latin America and the Caribbean: Trends and Challenges of Investing for a Sustainable and Inclusive Recovery, the United Nations agency said Government expenditure is also expected to rise and revenue expand.
According to the report, the economy of the Caribbean region is expected to grow overall by some 10.2 per cent, due to the whopping 52 per cent growth expected in the Guyana economy.
Meanwhile, Latin America and the Caribbean together are projected to have average growth of 2.7 per cent, returning to the path of low growth it was following before the COVID-19 pandemic.
This, it said, was keeping with the slowdown seen in the first half of 2022, after growth of 6.5 per cent in 2021.
“The countries of Latin America and the Caribbean face a complex economic and social environment in 2022. Weak economic growth is accompanied by strong inflationary pressures, slow job creation, falling investment and growing social demands. This situation has created major challenges in terms of macroeconomic policy, with a need to reconcile policies that promote economic recovery with policies to rein in inflation and make public finances sustainable,” ECLAC said.
“The complex domestic situation in the region is compounded by an international landscape in which the war between the Russian Federation and Ukraine has heightened geopolitical tensions, dampened economic growth, reduced food availability and driven up energy prices, adding to existing inflationary pressure caused by supply shocks from the coronavirus disease (COVID-19) pandemic.”
The report said that in the Caribbean, total revenues are expected to increase again in 2022, driven mainly by rises in tax revenues and revenues from other sources, such as non-tax revenues, capital revenues and external grants.
“This increase reflects rapid growth in tax revenues in the first few months of the year in several countries. In the cases of the Bahamas, Barbados and Trinidad and Tobago, the trend in tax revenues is primarily explained by growth in the amount collected through value added tax. Non-tax revenues are expected to increase slightly, driven by larger external grants in several countries,” it said.
ECLAC placed Barbados as the country with the ninth highest weighted inflation rate out of 27 countries in the region with figures, as of May, of 9.3 per cent, behind St Lucia, Dominica, Paraguay, St Kitts and Nevis, St Vincent and the Grenadines, Antigua and Barbuda, Bolivia and Mexico. The median average was said to be around 7.7 per cent.
The ECLAC report also suggested that in the Caribbean, public spending is expected to grow in 2022, driven by public investment and higher interest payments. In line with the expected trend in Latin America, primary current spending is expected to contract during the year, mainly owing to lower outlays on pandemic-related subsidies, it added.
“In contrast, capital expenditure looks set to increase significantly, although this is highly dependent on inflows from external grants . . . . Interest payments are expected to rise again, in line with higher projected expenditure for some countries, such as Barbados (where interest payments grew by more than 100 per cent in real terms in the year to March), St Vincent and the Grenadines and Suriname,” it said.
In relation to fiscal balances in the Caribbean, ECLAC said they were expected to remain close to last year’s levels, though indicating that Barbados should be among countries in which the primary balance is expected to “turn into a surplus”.
When it comes to the debt-to-GDP level in the Caribbean, ECLAC said it reached some 84.1 per cent in March 2022, which was four per cent lower than at the end of 2021.
However, in the case of Barbados and Suriname, the Chile-based organisation said those debt levels stood out at 131.4 per cent and 131.2 per cent, respectively.
“Despite the relative stability of the subregional average, the Caribbean countries still have very high debt levels compared to other regions with similar income levels. The effects of the pandemic on the subregion have considerably increased levels of public debt, with debt-to-GDP ratios of over 80 per cent in the last few years,” it said.
It noted that in the Latin America and Caribbean region, the value of exports is expected to rise by 22 per cent this year, and the value of imports by 23 per cent, as domestic demand continues to grow.
According to the 251-page document, with increasing uncertainty about global growth, inflation trends and developed economies’ monetary policy responses, international financial markets have become more volatile, creating more demanding conditions to obtain financing, which is detrimental to the countries of the region.
“In addition, the dollar has tended to appreciate against almost all currencies, which is also unfavourable for Latin American and Caribbean countries,” ECLAC stated.
Addressing a press conference held at the commission’s headquarters in Santiago, Chile, Acting Executive Secretary of ECLAC Mario Cimoli urged countries to implement policies that encourage growth and poverty reduction.
“In a context of multiple goals and growing restrictions, there must be a coordination of macroeconomic policies that would support the acceleration of growth, investment, and poverty and inequality reduction, while also addressing inflationary dynamics,” said Cimoli.
