The Barbados economy continued its modest recovery with 9.8 per cent growth during the July to September quarter, bringing the expansion for the first nine months of this year to an estimated 10.1 per cent, according to the latest Central Bank report.
Delivering his economic review for the first nine months of this year, Central Bank Governor Cleviston Haynes said on Wednesday that growth continued to be led by tourism activity “and its spillover into the non-traded sectors and the manufacturing sector”.
He is maintaining a forecast for double-digit growth of 10 per cent for this year and continued growth for 2023 due to a predicted further upturn in global tourism and the implementation of large private and public sector construction projects.
Tourism arrivals at the end of September reached 302 863, around 58 per cent of 2019 levels. This compared to 239 639 visitors for the first nine months of last year.
Haynes noted that with the relaxation of global COVID-19 containment protocols, tourist arrivals have been steadily rising, reflecting the global demand for travel.
“The increase in airlift, though still not at 2019 levels, allowed Barbados to benefit from the rising demand for international travel,” he said.
However, the slower rate of recovery during the summer months was compounded by the cruise industry reallocating vessels to other regions, explained the Central Bank Governor.
“This dampened the recovery of the attractions sub-sector, some of whose members depend heavily on cruise activity,” he acknowledged.
Lower visitor arrivals during the summer period led to a fall-off in occupancy levels from the first half of the year, while the average revenue per available room for the first nine months of the year more than tripled from a year prior. It was just 10 per cent lower than in 2019.
The sharing economy also continued its recovery, with occupancy levels averaging 59 per cent for the first nine months of this year, and was 9.5 per cent less than the same period in 2019.
The tourism sector contributed an estimated $508.2 million to economic activity for the first nine months of 2022.
Despite the rebounding tourism sector and modest growth, Haynes warned that “significant downside risks to the economic recovery remain, largely revolving around the challenging external economic environment that has impacted the availability and the price of international commodities”.
The quarter under review saw slower inflation in Barbados when compared to the same period last year, which the Central Bank attributed to the start of a decline in food and energy prices internationally with the re-entry of Ukrainian food supplies into the global commodities market and the price relief initiatives of the Barbados Government and the local private sector.
He reported that the relief measures, which took effect towards the end of July, have started to ease inflationary pressures, evidenced in the reduction of the prices of bread and cereals, meat, milk, cheese, eggs and personal care items.
However, Haynes warned that “prices still remain elevated when compared to August last year”.
The inflation rate as of the end of August was 7.8 per cent, down from 11.5 per cent at the end of June.
The Central Bank Governor said: “This reduction in price pressure should aid the ongoing recovery. However, oil producer efforts to drive up prices and expected supply challenges for fuel in Europe during the winter period now threaten to undermine the gains.”
Reporting on the Government’s economic performance, Haynes pointed to falling debt levels, an improvement in revenue, and a decline in expenditure for the first six months of the fiscal year.
However, he pointed to the need for continued public sector reform to improve the quality of service while reducing the burden on public finances, to free up resources for needed infrastructure development and climate resilience building. He said continued public sector reform should also lead to improved productivity and competitiveness of the public service.
Total revenue rose by $254 million, on the strength of broad-based increases in tax revenues, to reach $1.561 billion between April and September.
Meanwhile, current expenditure reached $1.377 billion during the same period. Non-interest expenditure declined by $78 million given one-off capital spending occurring during the previous fiscal year, including the recapitalisation of the National Insurance Scheme ($50 million) and the purchasing of roll-out carts under the Sanitation Service Authority ($18 million).
“Grants to public institutions also registered a $27 million decline given a shift in the timing of transfers to some state-owned entities, while grants to individuals contracted by $7 million during the period,” said the Central Bank report.
“Goods and services rose by $47 million as spending on property maintenance, general operating expenses and utilities increased over the period. Wages and salaries remained broadly in line with the previous fiscal year while spending on interest payments increased as the step-up interest rate feature on domestic bonds commenced,” it added.
The surplus generated over the first half of the fiscal year eased Government’s borrowing needs and assisted with the repayment of debt service obligations.
At the end of September, the public debt stock stood at $13.8 billion or 126.6 per cent of Gross Domestic Product. Gross international reserves totalled $2.806 billion, equivalent to 30 weeks of imports of goods and services.
Haynes noted that labour market conditions also continued to improve during this year, with jobless claims “reverting to a normal trend”.
At the end of June unemployment was recorded at an estimated 9.3 per cent, down from 15.9 per cent a year earlier.
The three main industries accounting for improvements in the unemployment rate were tourism, wholesale and retail trade, and construction.
