Investors Feel Pinch of Barbados’ Economic Decline

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Central Bank of Barbados

 

BRIDGETOWN, Barbados, Thursday April 27, 2017 – Barbados’ poor economic performance may spill over to the bottom line of some local investors, with them seeing lower than average returns, investment manager Fortress Fund Managers has warned.

The company reported good returns in its recently published report for the first quarter of 2017, noting that all the Fortress funds “set new all-time highs in net assets and net asset value (NAV) per share”.

However, regarding their Caribbean High Interest Fund, the company cautioned in its January to March report that “there are very few investments in Barbados that meet the Fund’s objective of capital preservation and income. Investors should be aware that returns will likely continue to be lower than average during this unusual time as we remain squarely in capital preservation mode.”

Fortress again raised concern about the island’s economic woes, joining recent calls by noted economists, including former Prime Minister Owen Arthur and Royal Bank of Canada’s (RBC) group economist Marla Dukharan, for the country to urgently seek outside help to bail out the economy.

“At current rating levels of three notches above default, the question being addressed is no longer if a debt restructuring will need to occur, but rather when it will happen and how large the investor losses will be from it,” it cautioned.

Noting the island’s prevailing economic woes, which include a high fiscal deficit, falling government revenue and negative downgrades by rating agencies Standard & Poor’s and Moody’s Investor Service, Fortress lamented that promised measures to jump start economic recovery were too slow in coming, suggesting that a credible plan was lacking.

“On the other side of a restructuring, investors will typically want to see three things – a viable fiscal reform and economic growth plan from the government with support from other stakeholders, appropriate support from multilateral organizations, and a move to a sustainable debt profile,” it said.

“Unfortunately, none of these three yet appears to be in place, although the formation of working groups to advise on the debt and currency issues suggested some constructive initial steps may be underway.”

The reports were handed over last month to Prime Minister Freundel Stuart who indicated recently that “the recommendations made are being studied with a view to determining which proposals can be implemented in the short term and which are more medium term.”

He gave the assurance that “the appropriate sense of urgency was being brought to bear on the consideration of the report”.

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