The International Monetary Fund’s (IMF) forecast of slower economic growth next year has not surprised at least one economist. In any event, the Barbados economy has traditionally been one of slow and steady progress, rather than large spurts as has occurred in places like Jamaica, Trinidad and Tobago and more recently Guyana.
It could be argued that following the sharp declines that occurred during the pandemic years where economic activity plummeted by almost 14 per cent in 2020, the recovery process needed to be significant in the post-COVID-19 period.
It would not have been in anyone’s interest for the restoration of economic growth in this country to be a lengthy process. The fact that there was significant growth for 2022 in many ways reflected the major decline from which the country was emerging.
“The Government of Barbados continued to rely on financing from multilateral lending institutions to address the fallout from the COVID-19 pandemic. As a result, external debt had risen to 44.3 per cent of GDP by March 2022,” the Economic Commission for Latin America and the Caribbean reported.
The institution which monitors regional economies credited the island for its continued push to create a green economy by introducing several green transition measures in the 2022/23 budget.
In its final review of the Extended Fund Facility, the IMF, our key financial backer through the island’s restructuring programme, reminded us that accelerating the transition to renewable energy was going to be critical in achieving sustainable economic growth and reducing our vulnerability to international oil prices.
With the escalating war in the Palestinian territory following the attack on Israel last weekend, one can fully appreciate the need for this country to accelerate the goal of achieving the Barbados National Energy Policy 2019 to 2030.
The objective of the government is to reconcile its energy and climate policies while keeping economic development and environmental sustainability in mind. Important too, is the national aspiration to achieve 100 per cent renewable energy by 2030.
As we have articulated, targets seldom move along a linear path for countries, especially ones like ours that are small, developing states with open economies. We have little or no control over the shocks that could undermine our strategies.
It is, therefore, essential that we also monitor the latest geopolitical developments that are emerging from the Israeli response to last week’s attack by Hamas, a group once known as the Islamic Resistance Movement.
As Senior Minister Kerrie Symmonds, who has responsibility for this country’s foreign affairs and foreign trade assessed, the island is not out of the woods in terms of full economic recovery.
The IMF’s latest global economic report predicts growth will be lower by the end of 2023 than the previous year. The Washington-based institution expected the country’s gross domestic product (GDP) will grow by 4.9 per cent; however, that projection has been toned down to 4.5 per cent and even lower next year to 3.9 per cent.
With a number of large projects – many of them tourism, infrastructure and energy-based – set to commence soon, the administration will be hopeful that these key developments will form the basis of increased economic activity.
What many may be anxious about is the ability of those economic drivers to not only generate tax income for the state but also enough foreign currency to support imports and our debt repayment commitments.
Central Bank Governor Dr Kevin Greenidge, based on his recent comments in the media, is buoyed by what he is observing despite the IMF’s dampened predictions. Another local economist Dr Ankie Scott-Joseph cautioned that Barbados’ economy will continue to be dogged by international risks.
Chief among those constraints to growth will be inflation, which will continue to hamper consumer spending.
What ordinary Barbadians want, however, is to be assured that our policymakers are planning for contingencies because headwinds are definitely on the horizon.
