Barbados’ economy is faced with numerous macroeconomic challenges. During the period 2009 to 2013, the economy cumulatively contracted by 0.5 percent. This economic reduction is estimated by the IMF to continue for this year due partly to declining competitiveness especially in the tourism sector. This makes Barbados the only CARICOM country with negative growth for 2014. The negative growth is reflected in the poor performance of the main foreign exchange earning sectors and the below-average inflow of private foreign investment. Both of which have contributed significantly to the drop in international reserves and a deterioration of the external current account balance. Government’s fiscal deficit has worsened and is calculated to be near double digits while the debt levels grew on average 7.7% per annum in the past 5 years.
In response, the government has announced numerous revenue and expenditure measures, among them a new fiscal consolidation tax, a reduction of the public sector by 3000 persons, and a review of public enterprises to promote greater efficiency. The measures were estimated to cumulatively generate over US$250 million in savings. Ceteris paribus, the lay-offs could see the unemployment rate rising to near 14 percent, 3 percent higher than the latest available data (June 2013). There are also the possible social implications (such as crime and poverty) that would need to be factored in as well.
Growth has been another focus for the government. Four sectors have been earmarked to generate foreign exchange and growth – tourism, international business and financial services, agriculture and agro-processing, and renewable energy. Since the government is the single largest contributor to GDP (16 percent), reducing its expenditure will require other sectors to pick up the slack and create new growth. Foreign investment will also be critical for economic growth and to augment the international reserves stock.
Achieving macroeconomic sustainability would be a challenge for Barbados amidst a slow global recovery and a limited fiscal space. The policies and ideas put forward by the government have the potential to get the economy back on track, but progress can be hindered by the inability to implement at a quick pace.
It is nice to read a fair, balanced, non-political review of the reality of the macro-economic challenges on the ground in Barbados. Indeed, outside of the facts and numbers the major concern is broached in the final sentence. The need to implement measures, and responses to those measures, rapidly. This is not a characteristic of Barbadian society, in my short experience on the island. Everywhere I look I see opportunity and the energy and intention of the people to progress out of this situation, however, almost as a counter-balance, I experience engrained structural barriers and obstacles to rapid decision-making and business growth. The specifics of these have been well-expressed by many stakeholders on the island on many occasions, increasing in volume and frequency, each year. I can’t help worrying that, in the future, historians will only record “too little, too late”.