Barbados predicts modest economic growth for 2013
BRIDGETOWN, Barbados, Wednesday January 16, 2013 – Barbados is forecasting less than one per cent real economic growth for 2013 up from “no real growth” last year.
The Central Bank of Barbados said that the 0.7 per cent forecast for this year is based on the most recent forecast by the International Monetary Fund (IMF) of average growth of 1.7 per cent for the United States, the United Kingdom and Canada, the island’s major trading partners.
In a review of the Barbados economic performance for 2012 and prospects for 2013, the Central Bank said that the projections were also based on an improvement in consumer expenditure in these markets of 1.2 per cent.
“In addition, private capital inflows of BDS$600 million (One Barbados dollar = US$0.50 cents) are anticipated for activity in the tourism and construction sectors. No significant gain in employment is expected.
“Based on current trends in international commodity prices for food, and the IMF’s projection for fuel, domestic inflation could fall to the region of five per cent for 2013,” the Central Bank said.
It said Barbados' foreign exchange reserves increased during the year to BDS$1,467 million, and the import cover at the end-December stood at 18 weeks, even though there was no real growth in the economy in 2012.
Output and foreign exchange from tourism contracted, with a 6.2 per cent decline in long-stay arrivals and an increase of only 4.3 per cent in the average length of stay. However, import expenditure was contained, and the gap between import payments and foreign earnings was smaller than for 2011. The Central Bank said foreign exchange inflows on the capital account held up, thanks largely to the receipt of BDS$167 million from the sale of Barbadian shares in the former Barbados National Bank.
“The flat growth performance resulted from declines in tourism, other traded services and manufacturing,” the Central Bank said, noting that output in the non-traded sectors grew by only one per cent because of fiscal spending limits and the reduction in the traded sectors.
It said that several tourism related projects were ongoing, but foreign investment in real estate projects was down about 16 per cent.
The fiscal deficit for the April-December period is estimated at 6.4 per cent of gross domestic product (GDP), compared with 5.2 per cent in the same period of 2011. Revenue from personal taxes was down 10 per cent and Value Added Tax (VAT) receipts fell two per cent, but there was a nine per cent increase in property taxes.
Subsidies to government entities rose by two per cent and interest payments were higher by four per cent, the same figure as capital expenditure.
The bank said there was no additional foreign market borrowing and external debt service absorbed 6.2 per cent of earnings on the external current account.
“ The overall net debt of the public sector, after accounting for the financial assets of government and statutory bodies, was 54 per cent. The ratio of gross Government debt to GDP, when NIS is treated as part of Government, stood at 83 per cent, and the ratio of external debt to GDP was 31 per cent. “
It said that moderation in the rate of growth in international food prices brought some relief in the rate of inflation in 2012, from 9.5 per cent at the end of December 2011 to 6.5 per cent at the end of September. However, there was no alleviation of the rate of unemployment, which increased slightly to an average rate of 11.7 per cent over the nine month period.
The Central Bank said that banks maintained capital positions well above the statutory requirements and remained highly profitable, with adequate levels of liquidity.
“However, there was further deterioration in credit quality and loans not being fully serviced on time reached 12.7 per cent of total loans, compared with 11.1 per cent at December 2011. Actual losses on loans were no more than 0.2 per cent of total loans and advances.”
As it examined the prospects for economic growth this year, the Central Bank said Barbados, which is ranked 44th in the 2013 Global Competitiveness Index, would need to speed up the process with which the government and the private sector engage in new projects and in the facilitation of business activities by official institutions.
It said Barbados does poorly, by international comparisons.
With respect to agro-processing, exports of quality rum that is aged, blended and bottled in Barbados, account for 43 per cent of rum exports and the Central Bank said that this premium segment of the market will be less severely affected by the US subsidisation of commodity rum produced in the US Virgin Islands.
Over the next five years, the potential exists for alternative energy sources to contribute more than 25 percent of Barbados’ power needs, through the implementation of distributed solar and wind power generation and the installation of waste-to-energy and bio-mass cogeneration plants.
It said together with more efficient energy usage, this could result in a 20 per cent reduction in fuel imports by 2017. (CMC) Click here to receive free news bulletins via email from Caribbean360. (View sample)