Concerns raised about fiscal adjustment programme
With only about six months to go before the expected completion of Government’s 19-month fiscal adjustment programme, fresh concerns have been raised about the ability of Government to meet its targets.
In addition, president of the Barbados Chamber of Commerce and Industry (BCCI) Tracey Shuffler told Barbados TODAY that unemployment could rise even further in the current fiscal year, depending on what economic activities were introduced over the next five months.
The unemployment rate jumped from 11.7 per cent at the end of March to about 13.2 per cent at the end of the second quarter of this year.
Shuffler said a number of private sector entities have closed their operations due to the economic conditions and others were struggling to remain afloat.
“Some of our members are indicating that they are having to make some reductions in their workforce. Others are actually expanding by focusing on export. However, there are obviously concerns with the level of unemployment that it has risen and there is, quite frankly, potential for it to go a little bit higher. We expect that is possible within the coming months because of dislocation due to the fairly continued soft economy that we are facing,” she said.
“If a number of the projects that have been discussed in the public forum come to bear then we can expect an increase in the level of support services and construction and other spin off areas from association with those major projects. However, if they don’t happen, then the questions become where will the increase in employment be driven from?”
Describing the last reported reserves of 15.1 weeks of import cover as being “at a reasonable level”, Shuffler said there was some level of comfort it was “stable for now”.
She said, however, “the big concern is the fiscal deficit”.
“Reducing that deficit is proving to be a great challenge because we have seen only a $50 million reduction in that deficit in the first quarter of the Government’s financial year. And if you have only done $50 million out of a proposed $450 million for the first quarter, how is it going to be accelerated over the next three quarters in order to bring down the deficit?” Shuffler questioned.
“VAT has not been able to raise the level of revenue expected, nor has personal income tax, [and] we expect that there will be a fairly rigorous level of non-compliance on the Municipal Solid Waste Tax. So again, how are revenues going to be raised to a level that is going to impact positively on this deficit?”
She said what was also an area of concern for the business community was Government’s ability to control its debt.
“Even with transfers on goods and services by Government, what is happening is that the interest payments are increasing significantly . . . So unless this can come into line, then the level of confidence that the economy is going to be driven forward is going to continue to be soft,” the BCCI president warned.
Shuffler added that while foreign direct investment seemed to be on the increase, given a number of hotel projects, the level of local investment was not yet where it ought to be.
“Some of it is due to confidence and in other cases it is just due to a soft economy, and the concern that if the investment is made the return on it will not be what the shareholders would wish,” she said.