Barbados economy contracts during first half of the year

BRIDGETOWN, Barbados, Thursday July 11, 2013 – The Barbados economy contracted during the first six months of the year with the main foreign exchange sectors also suffering a decline, according to figures released by the Central Bank of Barbados (CBB) on Tuesday.

The CBB said that among the priorities for the future will be to reduce spending “in the economy so as to balance the inflows and outflows of foreign exchange” and also “to revive economic growth led by tourism, international business, agro processing and alternative energy”.

The CBB said that the first half of 2013 saw a contraction in the main foreign exchange earners, namely tourism and international business and financial services.

“At the same time, private foreign capital inflows were less than a quarter of the figure recorded in the same period last year,” the CBB said, adding “foreign exchange  levels were relatively unchanged for most of the first three months, but weakened considerably during the second quarter”.

The CBB said as a result, the foreign reserve cover fell from 19 weeks of imports as at March to 16 weeks at the end of June.

“Overall economic growth is estimated to have contracted by 0.6 percent in the first half, inflation rate is estimated at 2.7 percent to June and the rate of unemployment was 11.5 percent at end-March,” the CBB added.

It said that long-stay visitors decreased by seven percent for the first six months of the year with earnings also declining by three percent.

The Central Bank said the island recorded declines in all markets including the United Kingdom, Canada, the United States and the Caribbean.

“The average length of stay was higher by about four per cent but airline seating capacity and hotel room occupancy rates were below last year’s levels,” the CBB said, adding that within the financial services, the island also recorded declines.

It said the number of new licences issued to international businesses and financial services (IFBS) increased by eight percent up to May, but renewables fell by 14 percent.

“Measures to stimulate this sector included amendments to the tax structure and intensified marketing in Canada and Latin America.”

The CBB said that rum exports also declined by 37 percent and exports of sugar were down significantly in the first four months, the CBB said, adding that similar declines were recorded for exports of chemicals and other beverages.

Activity within the construction sector declined by nine percent and the government’s deficit to gross domestic product (GDP) ratio for the April to June period “widened to an estimated 9.4 percent, up from 6.2 percent during the first quarter of fiscal year 2012/13”.

The CBB said that tax receipts fell BDS$36 million (one Barbados dollar=US$0.50 cents) or six percent due to declines in value added tax (VAT) and personal income tax, BDS$20 million in each case.

On the other hand, expenditure rose by BDS$18 million or three percent, interest payments rising by BDS$12 million and transfers to state-owned enterprises rising by seven million dollars.

The CBB said the government’s deficit of BDS$198 million was financed by commercial banks, non financial institutions, the National Insurance Scheme and the CBB itself.

It said that external indebtedness fell by BDS$22 million.

“The overall public debt, net of public sector financial assets, increased by BDS148 million to the equivalent of 58 percent of GDP,” the CBB added.

The CBB said that going forward, economic growth of three percent by 2017 is achievable, noting that last month the government held a national consultation with special partners with a view to addressing the priorities for the economy.

“Based on investment projects that have been identified by private sector enterprises and infrastructural and other projects which the government plans  over the next five years, growth rates rising from about one percent in 2014 to over three percent in 2017 are achievable,” the CBB said.(CMC) Click here to receive free news bulletins via email from Caribbean360. (View sample)