Governor: Growth in first three months signals full pandemic recovery

The receipts are in and a record-setting winter tourist season has boosted the Barbadian economy by 4.1 per cent from January to March, marking an “unprecedented” run of expansion for 12 quarters in a row and putting the COVID-19 pandemic’s economic crisis firmly in the rear-view mirror, the Central Bank of Barbados said on Tuesday,

Governor Dr Kevin Greenidge said that both in real and nominal terms, the first three months have been a “very strong quarter”, buoyed by tourism’s “extraordinary performance” with a 14.8 per cent increase in visitor arrivals.

“We had about 228 828 tourists on island for the first quarter,” he told reporters. “That’s the highest on record in any year, even surpassing the first quarter of 2019. In fact, from November last year, December, January, the entire winter season, those monthly performances were also the highest on record.”

The United States market grew by 47.6 per cent, Canada by 21 per cent, and the Caribbean Community (CARICOM) by 20 per cent. Arrivals from the island’s main source market, the UK, were down slightly in comparison to last year’s levels but continued to rebound from the coronavirus pandemic at 34.3 per cent above pre-pandemic levels.

“The 14.8 per cent increase in tourist arrivals would have benefited the entire industry…and we saw hotel occupancy rates increasing by 4.1 per cent, revenues on average, revenues per room going up by 3.7 per cent,” Dr Greenidge said.

There was also growth in the shared accommodation industry led by Airbnb, where occupancy rates went up by 7.1 per cent and revenues by room rose by seven per cent.

The central bank chief also disclosed that arrivals by sea recovered strongly, moving 96 per cent close to pre-pandemic levels, driven by an additional 15 cruise ship calls.

There was broad-based growth in other productive sectors of the economy but agricultural output dipped, which the Central Bank blamed on extreme heat.

“Manufacturing increasing by at least 1.7 per cent, wholesale and retail up, benefiting from the tourism activity; government and businesses up, construction up…we have had additional work both in the private sector and the public sector, including the mill and paving work,” Dr Greenidge said.

“However, we saw declines in agriculture, reflecting mainly the harsh weather conditions – extremely hot conditions and intermediate bouts of rain…and that meant that food crops, root crops, fruits, meats, milk production…most of those things were affected tremendously by the extreme weather conditions, and, therefore, they were down. Chicken was up, and that met the tourism demand and local demand, and fish landings were also up. But overall, the sector tends to be down, and that is one of the challenges we face with these extreme shocks and conditions.”

Joblessness also dropped from 8.4 per cent to 7.9 per cent at the end of December last year, based on the latest available data, the bank said.

The governor noted rising employment in retail, tourism, construction and manufacturing while unemployment claims shrank to one of the lowest levels since the pre-pandemic period. He said he expects joblessness to remain low, at least for the rest of this year as Barbados prepares for the ICC Men’s T20 Cricket World Cup in June.

But while international inflation rates dampened over the last year, the effect of adverse weather conditions on the supply of food crops and livestock, coupled with an increased demand for dining out, alcoholic beverages and rental prices left Barbados’ inflation rate at 4.2 per cent in February compared to 6.2 per cent for the same time the year before.

“That easing of the inflation rate means that prices increased by 4.2 per cent for the year,” Dr Greenidge explained.

The nation’s foreign exchange reserves remained healthy, according to the central bank governor. The international reserves grew by $250.8 million to stand at $3.2 billion or 33.3 weeks of import cover, nearly tripling the global benchmark.

“Enhanced net tourism receipts of $859.6 million and incremental funding from multilateral development banks of $225.3 million, primarily drove this reserve accumulation, while financing the merchandise trade deficit of $540.4 million represented the primary outflows,” the Central Bank said.

Dr Greenidge also said that increased revenue from transactional-based taxes such as Value Added Tax (VAT), the airline travel and development fee and import duties helped the government meet its fiscal targets, despite higher interest spending. He pointed out that the transactional-related taxes offset a $1.7 million decline in direct taxes that resulted from the abolition of the pandemic levy.

Looking ahead to the rest of this year, the bank head is forecasting a 3.9 per cent growth in the economy, coupled with additional increases in tourist arrivals and continued investment in the country.

He expects tourism to exceed its 2023 performance, boosted by the hosting of the T20 World Cup and improved air access.

Dr Greenidge also projected that local inflation should ease over the medium term, moving in tandem with falling international commodity prices. Gross international reserves are also forecast to maintain a healthy position at the end of this year, while public sector reforms and growth-enhancing initiatives are expected to strengthen the government’s ability to achieve targeted primary surpluses as they support domestic economic activity.

It is anticipated that agricultural output is expected to recover if the government provides farmers with incentives, but Dr Greenidge warned that another year of poor weather could affect returns.

“Risks to the outlook remain balanced for 2024, with steady growth and disinflation in the world economy,” the bank boss added.

emmanueljoseph@barbadostoday.bb