Barbados economy on slippery slope

BRIDGETOWN, Barbados, October 29, 2009 – The global recession continues to restrict growth in Barbados, with a 4.4 per cent decline in the economy for the first three quarters of the year. The January to September months also marked the worst slump in tourism, for that period, in almost 20 years.

And according to Central Bank Governor Dr Marion Williams, the economic slide will continue for the rest of the year, albeit at a slower rate.

“Declining tourist arrivals, in particular, triggered reduced activity in both the traded as well as the non-traded sectors and led to a 4.4 per cent decline in real GDP and a concurrent rise in unemployment,” she said yesterday as she presented her final review as Central Bank Governor.

Dr Williams, who will take up a diplomatic post in January next year, added that with figures suggesting economic recovery among Barbados’ main trading partners will be modest, growth is likely to continue on a negative path for the rest of 2009.

“The baseline scenario contemplated by the Bank is a decline of roughly four per cent by year-end, with a possible recovery late in 2010,” she said, although adding that that hinges on the performance of the tourism sector during the 2009/2010 winter season.

But that too is based on how the country’s main source markets perform. The Central Bank Governor said that the most likely outcome, based on current economic indicators for these countries, is continued low output in the tourism sector throughout the remainder of the year.

“In addition, the sector is likely to be further negatively impacted by the increase in the UK’s Air Passenger Duty in the last quarter of 2009,” she pointed out.

In her review of the performance of the various sectors, Dr Williams reported that the tourism sector continued to bear the brunt of a still fragile global economy, as evidenced by reduced long-stay arrivals to the tune of approximately 11.4 per cent up to September 2009, which is on top of the 0.2 per cent decline witnessed in the preceding year.

Preliminary estimates up to the end of September suggested that smaller numbers of visitors arrived from the United States (-17.4 per cent), United Kingdom (-14.0 per cent) and CARICOM (-12.6 per cent), in particular. In contrast, the number of Canadian visitors rose by 11 per cent due, in part, to an increase in airlift capacity from Western Canada. However, this was insufficient to negate the declines in other markets.

“When the 0.4 per cent dip in cruise passenger arrivals is taken into account, tourism value-added is estimated to have slumped by 9.8 per cent, marking the largest nine-month decline in the sector since 1990,” Dr Williams noted.

The indirect effects of the slump in tourism activity were most reflected in the non-traded sectors, particularly wholesale and retail and transportation, storage and communications, where output fell by 2.6 per cent and 2.7 per cent, respectively.

The agriculture sector experienced positive growth – with the sugar industry expanding by 1.2 per cent and the non-sugar agriculture by 1.7 per cent. However, the manufacturing sector plummeted by 11.8 per cent.

The slowdown in overall economic activity had a negative impact on employment levels. The unemployment rate at the end of June was 9.9 per cent, compared to 8.6 per cent at the same time last year.

The breakdown of those figures show that female unemployment rose from 9.4 per cent to 10.1 per cent, while the male unemployment rate increased by an even larger margin – from 7.8 per cent to 9.6 per cent.

“The greatest concentrations of job losses were experienced in the construction and quarrying, transportation and communication and general services sectors,” Dr Williams said in her report.

She said that with all sectors that provide ancillary services to the tourism sector anticipated to experience negative growth and the construction sector expected to struggle in the short- to medium-term as foreign investors continue to experience difficulties funding large projects, the average rate of unemployment should continue to rise.

But the Central Bank Governor is urging the government and private sector to keep up efforts to maintain jobs.
“I think that as long as you can keep people employed, you will therefore keep businesses open and if you keep businesses open you will register some kind of growth or at least you will mitigate the decline in economic activity,” she said. “When unemployment starts to get to uncomfortably high levels, then it affects output, it affects the performance of every sector and so on.”