Economy records double-digit growth – Governor

The tourism sector continued to lead a very strong economic recovery last year, resulting in growth of 10 per cent. 

This has resulted in an expansion of Barbados’ gross domestic product (GDP) to just over $11.35 billion, the Central Bank of Barbados reported on Wednesday.

At the same time, the unemployment rate up to the end of September 2022 was estimated to have dipped to its lowest level since the last quarter of 2007, falling to 7.1 per cent.

Delivering the 2022 economic review of the Barbados economy, Governor of the Central Bank Cleviston Haynes said while the uptick in GDP was influenced by higher inflation, he was encouraged by the lower unemployment rate. 

This, he said, suggested that production had likely improved.

“So, we are moving in the right direction,” said Haynes.

Stressing that the figures were preliminary, he added: “You may find that when we get the final numbers maybe we did a little better than we indicated here.”

The Central Bank Governor said the “rejuvenated performance” was led by the tourism sector, as the relaxation of COVID-19 restrictions on travel, recreation and business operations enabled a full reopening of the economy. 

“Preliminary estimates are that economic output rebounded by 10 per cent, generating a U-shaped recovery path. With the strong upturn, the labour market was marked by fewer unemployment claims, increased participation rates and a reduction in unemployment,” he explained.

Haynes reported that visitor arrivals for 2022 more than tripled those in 2021, representing a recovery that was 62 per cent of the record levels recorded in 2019.

“During the fourth quarter, long-stay arrivals registered their strongest quarterly performance with December arrivals reaching 78 per cent of pre-COVID levels. Rising average length-of-stay partly compensated for the loss in arrivals and enabled hotel occupancy to reach 91 per cent of that recorded in 2019,” he added.

The cruise sector saw a slower recovery, with arrivals only at 36 per cent of pre-COVID levels.

“The start of the winter season was encouraging, but the complete absence of cruise calls in the summer prevented a more robust comeback. Nonetheless, the partial revival contributed positively to the ancillary sectors, including transportation and attractions,” said Haynes.

The economist noted that the tourism recovery was broadly in line with expectations, despite diminished flight availability and elevated ticket prices for the destination. 

While the international reserves fell to $2.77 billion or 29 weeks of import cover at the end of last year, compared to $3.058 billion the previous year, this was higher than it had ever been in any year prior to 2020.

Even in the face of a continued challenging economic environment last year, which required increased spending, the Government’s fiscal performance in 2022 also improved, based on the economic upturn and favourable tax revenue performance.

Haynes reported that while interest rates rose, non-interest expenditure showed very little change and capital expenditure was lower, keeping the Government on track to achieve a primary surplus of at least two per cent of GDP for the fiscal year which will end March 31, 2023.

Government revenue was estimated to have increased by $398 million to reach $2.393 billion in 2022. Expenditure also increased to reach $2.133 billion, up from $1.989 billion the previous year.

Debt-to-GDP was estimated to have fallen to 124 per cent or $14.1 billion at the end of the year under review.

While forecasting a growth rate of between four and five per cent for the economy this year, Haynes, whose last day as Governor will be January 31, warned of challenges ahead.

“The Bank anticipates that the resurgence of the tourism sector will not be as rapid as in 2022. The momentum for a sustained economic recovery, therefore, requires increased public and private sector investment. Such investments, including in tourism and the physical infrastructure, have the potential to enhance the economy’s productive capacity, modernise the economy, absorb labour and create positive spill-over effects for small and medium-sized businesses,” he said.

“But the road ahead remains challenging because of factors that continue to expose the vulnerability of the domestic economy,” he warned.

The Central Bank Governor highlighted risks such as inflationary pressures, the lingering conflict between Russia and Ukraine and other geopolitical tensions, as well as higher fuel and consumer prices which he said had the potential “to constrict the purchasing power of consumers, which could slow the projected growth path”.

“Moreover, the aggressive measures taken by advanced economies to fight inflation have created the risk of recession. The depth of such a recession is uncertain, but tourism-based economies like Barbados face the risk of a slowdown at a critical juncture in the recovery,” he said.

He also pointed to a resurgence of the COVID-19 pandemic in some countries which could disrupt supply chains.

“These diverse but interrelated risks underscore the importance of strengthening our marketing efforts and product quality within the tourism sector,” warned Haynes.

He also said there needs to be a concerted effort to make state-owned entities self-sufficient. 

While indicating that the Government’s capital works programme will be a key driver of the growth effort, Haynes added that the strength of the recovery cannot rely solely on public sector spending.

“As a society, we need the input of all stakeholders, embracing critical thinking, innovation, improved business processes, enhanced skills training and, where necessary, the acquisition of new skill sets,” he said. marlonmadden@barbadostoday.bb