BRIDGETOWN, Barbados, Thursday November 2, 2017 – The Barbados economy is still in a slump and remains on a downward track, with the island’s foreign reserves in a worse position despite onerous tax measures introduced in the last budget.
Acting Central Bank Governor Cleviston Haynes reported that while the economy posted a modest 1.4 per cent growth during the first nine months of the year and raked in an additional BDS$98.6 million (US$49.3 million) in tax revenues, the foreign reserves was way below the international benchmark of 12 weeks of imports and the fiscal deficit was still too high.
In his report, which outlined the country’s performance for the first nine months of the year, international reserves plummeted to just 8.6 weeks of imports or BDS$549.7 million (US$274.85 million), putting more pressure on the stability of the Barbados dollar.
At the same time, he reported Government’s overall debt had climbed to 144 per cent of gross domestic product, with current expenditure increasing by BDS$13.9 million (US$6.95 million), largely due to an increase in grants to public institutions.
The deficit, which is estimated at BDS$279 million (US$139.5 million)for the last six months, showed a BDS$115 million (US$57.5 million) improvement over the same period in 2016.
Haynes said tough decisions were facing the Freundel Stuart administration.
He stayed clear of repeated calls from other economists and key social partners for the government to seek help from the International Monetary Fund or any other financial institution, but stressed strong action had to be taken.
“It goes without saying that we are concerned about the direction in which the reserves have been going,” he said.
“Despite moderate economic growth and policy-induced reduction in the fiscal imbalance, the Barbadian economy continues to face significant economic challenges. In particular, strengthening of the international reserves is needed to ensure that the reserve buffer remain adequate in order to protect the fixed exchange rate peg.”
He further urged the government to address expenditure, underscoring the need for more cuts.
“Political decisions will have to be taken as to where they want to effect such cuts and what the nature of those cuts will be. When I say cuts in expenditure it could come in different forms . . . but the bottom line is that we have to reduce the size of the fiscal deficit,” Haynes stressed.
“The fiscal outlook underscores the need for expenditure restraint in the short term to supplement the recently introduced revenue measures, as Government seeks to place the public finances on a sustainable path and reduce the debt overhaul,” he added.
The Central Bank is forecasting growth of 1 to 1.5 per cent this year, but it noted that this was largely dependent on whether large scale tourism-related project got off the ground.