Governor Cleviston Haynes Gives His Outlook for the Economy

The Bank forecasts that the economy will expand within a range of 1.25 percent to 1.75 percent in 2020. This positive outlook hinges on continued growth in tourism and the recovery of private investment. Special events, including “We Gatherin’ Barbados” and the 15th UNCTAD quadrennial conference, should boost the tourism and ancillary sectors and complement the activity related to the investment projects that are expected to start during the year. The overall pace of activity will be influenced by the start-up date of these projects. Investors are finalising plans in several cases and obtaining the necessary regulatory approvals. Implementation of several of these projects is multi-year in scope and this should enhance medium term growth prospects by enhancing Barbados’ competitive capacity.

Barbados is ranked 128th out of 190 economies and 20th out of 33 Latin American and Caribbean countries covered in the 2020 Doing Business Report. Structural reforms are therefore needed to improve competitiveness indicators to support sustainable long-term growth. Addressing weaknesses in the business climate, including the time required to obtain construction permits, acquiring electrical connections and registering properties together with improved labour market productivity, remain central to creating conditions for improved competitiveness and sustained growth.

Enhancing doing business must also extend to the financial sector. To improve decision making in the sector, the Bank expects that the legislation supporting fair credit reporting will come on-stream during 2020, providing a regulatory framework for licensing and regulating credit bureaus. In addition, the Bank will continue to promote improved delivery of financial services, particularly in the area of payments. This improvement will involve extending access to the Automated Clearing House directly to the credit union sector for direct debits, upgrading the Real Time Gross Settlement system, introducing oversight legislation for the payments system and promoting the reduced use of paper-based transactions such as cheques and cash so as to improve settlement efficiency of domestic payments.

In its latest release of the short-term energy outlook, the U.S. Energy Administration forecasts a modest increase in the price of West Texas Intermediate crude oil. This projected increase follows the confirmation of deepening production cuts by Organisation of Petroleum Exporting Countries members and Russia, along with expectations of heightened demand pressures linked to the conclusions of phase one of the U.S.-China trade deal. The Bank forecasts that domestic inflation will slow to within the range of 2.5 percent to 3.0 percent.  However, there remains a down-side risk to this outlook related to the agriculture production outturn.

Fiscal consolidation efforts will continue to be the bedrock of macroeconomic stability. Achieving the targeted primary balance at the end of fiscal year 2019/20 remains critical to building on the progress made in 2019. Such efforts will reduce public sector indebtedness, restore investor confidence and facilitate further sovereign credit rating upgrades.

With the completion of the external debt restructuring, the public sector’s demand for foreign exchange will increase because of the resumption of debt service payments on the restructured debt.  Nevertheless, further accumulation of international reserves is expected, given the forecast for improved economic activity and the on-going funding support of international financial institutions.