by Patrick Hoyos
BRIDGETOWN, Barbados, Friday January 29, 2016 – In Greek mythology Sisyphus was a king who did a lot of “wrong things” and was punished, according to Wikipedia, by “being forced to roll an immense boulder up a hill, only to watch it roll back down, repeating this action for eternity.”
In Barbados, the Barbados Tourism Marketing Inc. (BTMI) reminds me of old Sisyphus, and the boulder they are pushing up the hill is the country’s economy. But there’s one big difference, the BTMI has only been doing all the “right things”.
Until a few years ago, you used to hear the politicians repeating that metaphor about firing on all four cylinders. It, says the Oxford dictionary, means “working or functioning at a peak level,” and comes from the internal-combustion engine, in which, says Oxford, “a cylinder is said to be firing when the fuel inside it is ignited.”
But instead of firing on all four “cylinders” these days, the Barbados economy is firing on just one – tourism.
And the BTMI, like Sisyphus, is the force pushing the economy up the hill, only to see it roll back down again.
I say that because, in its initial review of the economy for 2015, released on Tuesday, January 19, the Central Bank of Barbados said that the Barbados economy is estimated to have grown by a mere half a percent in 2015, thanks mainly to a strong performance by the tourism sector.
The bank said that tourism was the only sector to experience what it called “measurable growth.”
Tourism contributed five percent to GDP, with long stay arrival increasing by 14 percent. But the other “cylinders,” were hardly firing at all; and some seemed to have seized up.
In fact, construction activity decreased by around three percent, due mainly to delays in the start of major infrastructural projects, while retailing and other sectors saw limited improvement, because apart from tourism, there was little injection of foreign exchange into them.
In the international business sector, the bank noted, data up to August indicated a 6 percent increase in the number of new licenses issued to entities operating in the sector, but the business environment for international banks continued to be what it termed “a challenging one.”
Ladies and gentleman, on this tour of the latest Central Bank of Barbados’ view of our economic landscape, we have now left the Land of Facts and are entering the Land of Fantasy. It will be a bumpy ride.
I offer you that warning because, the bank goes on to say that, despite the economy growing by just half a percent in 2015, GDP will nevertheless increase by an annual average of 1.7 percent over the next five years. I know, it sounds too good to be true.
And even better than that, the sudden spike in growth will peak next year (2017), “when major tourism infrastructural projects, such as Sandals, Wyndham (the former Sam Lord’s Castle), and other tourism development projects are expected to be in process or nearing completion.”
My head became giddy with all of this great news. Then I went back to what the central bank said this time last year, in its outlook for 2015. It said the Barbados economy should grow by about 2 percent in 2015 due to $300 million of construction activity expected to get underway during the year, mostly in the private sector.
Well, that didn’t happen. The ships laden with gold to build the hotels have not yet arrived, unfortunately. Which is why the construction cylinder did not not fire in 2015.
Neither did the retail cylinder, because this is directly and indirectly fueled by activity in the tourism, offshore and construction sectors.
Meanwhile, the international reserves of the Central Bank ended the year at $927 million, which, the bank said, was equivalent to approximately 14 weeks of imports. I have no idea how the bank does its sums but last year, at this time, it said foreign reserves ended 2014 at $1,052 million, representing 14.5 weeks of import cover.
So our reserves fell by about $125 million, year-on-year, although we saved $380 million due to the falling price of oil. But, it seems, that was gobbled up by government spending.
The Caribbean Economic Report, written by Group Economist Marla Dukharan and published monthly by RBC, referring to the September 2015 report from the Central Bank, said it highlighted “the ineffectiveness of fiscal spending in generating sustainable growth, and the urgent need for public sector reform, shortly after Moody’s affirmed the B3 (negative) rating in mid-December.”
That Moody’s report on Barbados noted that in Barbados, “budget flexibility is constrained by entitlements and transfers to loss-making state-owned enterprises, as well as high and increasing debt service costs.”
But, despite the pressing need seen by these commentators and others, including Standard & Poor’s, to reduce government spending, the central bank only hinted at major structural reform of government this year, saying “changes in the structure of Government departments and official bodies, designed to reduce expenditure,…should reduce the size of the fiscal deficit.”
The only thing keeping the government going for now, apart from spending all of those oil dollars we saved, is that there has been no increase in retail prices in 2015, which is also due to the continuing slide in international oil prices since the beginning of last year, according to the central bank.
But, ever seeing the glass half full, in its Land of Milk & Honey section of the report, the central bank said the government’s 2015/16 fiscal deficit target of 4 percent of GDP could still be achieved if the administration completes the planned divestment of the Barbados National Terminal Company Ltd. before the end of the fiscal year on March 31.
And here I was thinking that when you sell a fixed asset, you shouldn’t use the money on current expenditure. Boy, was I ever wrong.
So instead of tackling the painful task of making our government less costly to operate, which means inevitable cutbacks in employment and selling off some state assets, the administration has put the country’s problems on pause while pressing “play” on a whole year of national Independence celebrations.
As for us, we are all like Sisyphus now. Only the boulder keeps getting bigger.
The opinions expressed in this commentary are solely those of Pat Hoyos. This article is exclusively republished with the permission of Pat Hoyos and appeared in the Broad Street Journal. Pat Hoyos is a business writer and publisher of the Broad Street Journal.