Central Bank Governor Gives Outlook for Barbados’ Economy

Central Bank of Barbados Governor, Cleviston Haynes, says that decisive and sustained action is necessary to repair Barbados’ economy and is calling for all stakeholders to remain focused and committed to reversing the island’s economic fortunes.

While delivering the Central Bank’s review of Barbados’ economic performance in the first three months of 2018, Haynes described the outlook and as “challenging” and identified three priority areas:

"Decisive stabilisation measures that place the public finances on a sustainable path, alter the trajectory for the international reserves, and create the conditions for strong durable growth are now needed."

While the fiscal deficit fell to 4.2% (down from 5.7% in fiscal year 2016-17), Haynes stressed that more needed to be done:

"Addressing the public finances remains a priority so as to stabilise and ultimately grow the economy. Our efforts to date have not resulted in bringing the fiscal deficit to a manageable level. The demand for local Government securities has declined and the excess of external debt service over external borrowings continues to create added financing pressure. The impact of these developments in recent years has been a build-up of domestic arrears and increased reliance on Central Bank financing. The current borrowing requirement for fiscal year 2018/2019 therefore needs to be reduced."

He also highlighted the importance of boosting the island’s international reserves, noting that

"Sustainable growth must be underpinned by an adequate foreign exchange reserve buffer. The modest reserve growth in the first quarter and into April needs to be supported by further inflows in light of debt service commitments and the risk of rising international oil prices. In this regard, the ongoing uncertainty related to asset sales remains a source of concern. Accessing increased public and private sector capital flows is therefore warranted to strengthen the reserves position."

The Central Bank Governor went on to outline what is required in the short, medium and long term:

"The task at hand is to implement a strategy that reduces the current year deficit, builds the platform for strengthening the public finances over the medium-term and fosters an environment that creates access to external funding. In addition, we need to create the fiscal space to enable infrastructural development that promotes long-term growth. In these circumstances, improving the outlook requires Government's fiscal strategies to embrace durable expenditure reforms, including for state-owned enterprises and improved tax administration."

Haynes also revealed that as a result of the downturn in tourism and delays in the start of projects, the Central Bank has revised its growth projections for 2018 to between -0.25% and 0.25%. He noted, however, that Barbados’ ability to achieve this target depends on the nature and speed of fiscal adjustment measures and the level of new investment.