“Over the past year, we have seen continued closures in hotels and other tourism businesses… We have been talking about public sector reform in Barbados for years now, but we still have countless, needless frustrations to the sector that could be removed if the will was simply there to do it.” – Patricia Affonso-Dass, President of the Barbados Hotel and Tourism Association
All available indicators suggest that Barbados’ economy is back a recession. It is very likely that the anticipated Central Bank Review of the economy for the first nine months of this year will officially confirm this dismal prospect.
Reliable sources have revealed that long stay arrivals in Barbados for the first eight months of the year declined by 4.8 per cent or 19,220 visitors. In particular, arrivals from important source markets like the United Kingdom and United States delivered fewer tourists than a year earlier. Notable declines were also registered in the CARICOM market and cruise tourism is down 26.8 per cent.
In addition to the disappointing tourism out turn, the scale of closures of manufacturing enterprises and manufacturing job losses, highlighted a few weeks ago by the Barbados Investment and Development Corporation indicates that the fall in economic activity extends beyond the tourism sector.
As businesses operating in the wholesale and retail trade continue to struggle to keep their doors open, more jobs losses have been reported during the past nine months. In the coming days or weeks, official sources will tell us by how much the unemployment rate has risen. Hopefully the construction sector, which has not been particularly robust, has performed better during the last nine months. The resumption of the Four Seasons project would have been a boon for the economy. The failure to restart that project despite strong government support has been disappointing.
Other major foreign investment has been anaemic, insufficient to lift the economic tide in the country. Much to the chagrin of many Barbadians, inflation has not abated as the rising tide of prices continues to erode consumer purchasing power.
It will be interesting to see what impact these developments have had on Government’s fiscal deficit and the foreign exchange reserves. The out turn is likely to be negative.
With the exception of 2009 when the Barbados economy contracted by 4.1 per cent, Barbados’ economic performance has been flat; officially, growth of between 0.2 and 0.3 per cent has been reported. Of course it was also reported that since 2009 tourism spending has been down, suggesting that less money has been circulating throughout the economy from tourism sources. With little or no growth in other key sectors over that time period and rampant inflation, it is easy to understand why since 2009 it has continued to feel like a recession in Barbados.
Despite the global economic recovery since the Great Recession of 2008-2009, the world has been gripped by prolonged economic uncertainty due mainly to deleveraging and austerity in Europe and political paralysis in the United States. The European Union is frantically trying to defuse a debt crisis that threatens the euro and by extension regional integration and global trade. So far this year, growth in industrialised and emerging economies has slowed considerably, a trend that is expected to continue to year end.
As it relates to our major trading partners, earlier this year UK authorities reported that their economy is again in recession and the IMF has forecasted that the EU will be in recession by December. The IMF also revised its growth outlook downwards for the US, Canada, Emerging and Developing Economies and the World Economy, (which are expected to grow by rates of 2.0 per cent, 2.1 per cent, 5.6 per cent and 3.5 per cent respectively). Despite the slowdown, employment growth has continued in the US and Canada.
The global environment remains challenging. Since 2008 as a cloud of uncertainty continues to retard growth. The Government of Barbados needs to refocus its tourism marketing budget and adjust its marketing strategy in an effort to maximise arrivals from more promising source markets.
There is no doubt that the demise of REDjet, the closure of several hotels and rising prices have had an adverse effect on domestic economic prospects. Notwithstanding the fact that the pro-growth policies that were outlined in the 2012 Budget were long-term in nature, it is becoming clearer that a policy adjustment is warranted.
Short-term growth is desperately needed to lift the current economic tide. Emphasis needs to be placed on business facilitation, reducing the cost of doing business and where possible high impact capital investment. As a nation all economic participants must aspire to improve the quality of service — Barbados’ competitiveness depends on it. Government also needs to push ahead with public sector reform with alacrity.
I have written before about the imperative of restructuring government. A fine example of such retooling is the current undertaking of restructuring the Central Purchasing Department, which featured in yesterday’s edition of this publication, but more needs to be done.
* Carlos R. Forte is a Commonwealth Scholar and Barbadian economist with local and international experience. C.R.Forte@gmail.com