Economy headed in ‘wrong direction’

The Barbados economy is lagging when compared to the rest of the region. And one financial analyst has warned that if things did not improve any time soon, especially as it relates to the foreign exchange reserves, then Barbados may need to ring some “alarm bells”.

The dismal picture was painted during the First Citizens Investment Services Market Outlook Panel Discussion at Frank Collymore Hall yesterday. Making a presentation ahead of the panel discussion, general manager of First Citizens Investment Group, Jason Julien, spoke of the island’s weak economic growth, high debt levels, weak foreign exchange earnings and its susceptibility to external shocks.

“When we look at the Barbados economy compared to the rest of the region as a whole the reality is [that] we are lagging behind at this point. And that is not a surprise, right? I think we have once been way ahead of the pack and I think given the circumstances that have unfolded we now find ourselves lagging on certain fronts.

“The average growth rate expected for Barbados is 0.6 per cent and when you look at the Caribbean as a whole it exceeds that. So compared to our peer group we are behind.

“So 1.5 per cent for the rest of the Caribbean compared to 0.6 per cent for Barbados as an economy. A lot of it, of course, is anchored in terms of the state of play of tourism,” he added.

Touching briefly on the foreign exchange reserves, Julien said there were many expectations as to the capacity and what it would look like going forward, as well as the pace at which the reserve would be utilized.

“Our foreign exchange [reserves], there is very little I need to say about that because everyone knows that in an economy like ours, which we import a lot of materials and we also have foreign debt, you need US dollars to transact business. And that transaction can be either the repaying of obligations or buying goods and services that the economy needs, be it energy, be it consumer materials [or] be it food. The foreign exchange reserve over the period of time [between 2008 and 2014] is unfortunately heading very quickly in the wrong direction,”
said Julien.

“One view is that as we consume the reserves and we treat the obligations, if we remain on the current trajectory I think we are going to have a 12 to 18 month timeline whereby the reserves will continue to reach a point where you really have to start beating the alarm bell,” he added, stressing that the view was based on available data.

Julien said “a balancing part of the equation in terms of the reserve management” was that the majority of Government’s debt was domestic. He also highlighted the strong human resource pool on the island, saying it should be used to the country’s benefit.

Julien said when it came to the Medium Term Fiscal Strategy based on “the best possible data available”, Government debt was higher than initially projected although it was revised about three years ago to take into account some of the current realities.

“The expectation was originally that Government debt would have been 90 per cent of GDP. The current state of play is that that debt is almost a 100 per cent. The original expectation was that the budget balance would have been a five per cent deficit.

“The current state of play based on the information we have at hand is closer to a little more than double that at 11 per cent,” added Julien.

Meanwhile, economist Clyde Mascoll, who was a member on the panel, predicted that interest rates would rise in Barbados this year, adding that the worry should not be about the weeks of cover the island had in terms of foreign exchange reserves, but the reserves at the commercial banks.

7 Responses to Economy headed in ‘wrong direction’

  1. Beverley St John
    Beverley St John June 21, 2014 at 4:21 am

    Not now! Every long time since!

  2. Margaret Lorde
    Margaret Lorde June 21, 2014 at 5:54 am

    The true state of the economy was seen by most but felt by all…yet we have a feel good government that believes it’s own lies. Things will not get better soon.

  3. Frederick Alleyne
    Frederick Alleyne June 21, 2014 at 6:09 am

    Wrong long.

  4. Nicole Brathwaite
    Nicole Brathwaite June 21, 2014 at 7:00 am

    Everyone knows but the government

  5. Nicole Brathwaite
    Nicole Brathwaite June 21, 2014 at 7:00 am

    Everyone no but the government

  6. Glenn Damon Clarke
    Glenn Damon Clarke June 21, 2014 at 7:47 am

    Captain Obvious….

  7. David Hall June 21, 2014 at 8:08 am

    The fact that the only persons in Barbados who cant see that we need to do things differently to rescue Barbados are the DLP members and supporters is extremely alarming: After all, they currently hold the reigns of devolved power granted to them by the people.


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