In Barbados: Sluggish Growth – Economy To Pick Up In 2012

12 October 2011


Low growth expected this year amidst difficulties with major trading partners. 2012 holds more favourable expectations.

Growth in the Barbados economy this year is now projected to be little more that one per cent.

This projection was revealed yesterday in the review of the Barbados economy for the first nine months of 2011 by Dr. Delisle Worrell, the Governor of the Central Bank of Barbados (CBB).

The Governor stated that “prospects of a full recovery from the economic recession have become more distant because of the weakened growth prospects for the US, the UK and other advance countries”.

This is coming against the heels of a very ambitious projection of global economic output made earlier this year when the Governor said, “ the economy remains on course to achieve modest growth in the region of two per cent for 2011, provided there is no slow down in the tourism sector.”

However, the challenges faced by our main trading partners United States, UK and Canada leaves the small and vulnerable economies tied to these countries in a less that favourable position, which is reflected in the projection of not much more that one per cent.

Worrell explained: “Although the economy is expected to pick up speed somewhat next year the uncertain prospects for global recovery introduces a considerable margin of error to any forecast .”

In the review for the Outlook for 2012, he also reported, “ The UK Air Passenger Duty (APD) and the airlines industry’s adoption of the Emissions Trading scheme are not expected to have a significant impact on visitor arrivals for the remainder of the year. However , the impact of the London 2012 Summer Olympics Game may weaken the growth in arrivals next year .

Forecast of international prices of oil and commodities are for a reduction in the region of three percent in 2012 , and the average rate of inflation in Barbados should ease somewhat if projections materialize .”

“Government continues to pursue a strategy designed to reduce the fiscal deficit in line with a medium terms strategy for debt reduction . However , in view of the impact of the economic recession on Government revenues , it is prudent to adopt a somewhat longer horizon for the achievement of an overall fiscal balance and the fiscal targets published in the Medium Term Fiscal Strategy (MTFS) are being modified accordingly” he pointed out .

According to the Governor , “ Government will be challenged to find avenues to further reducing expenditure while averting reductions to social spending , and holding employment levels in the public sector . At the same time further tax increases are to be avoided , for the fear of crippling the tentative recovery in out put.”

The level of international reserves continues to decrease but ,the Governor indicated in the out look , “International reserves at year end are projected to be equivalent to about 18 weeks of imports , compared to 20 weeks last December.

This level of reserves offers an adequate cushion to protect the value of the Barbados dollar , and to accommodate expected fluctuations in the demand and supply of foreign exchange on the interbank market .”

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