Economist not happy with decisions announced in Sinckler’s ministerial statement
Noted economist Ryan Straughn has described today’s ministerial statement by Minister of Finance Chris Sinckler as disappointing, while describing the decision to extend the 19-month Fiscal Consolidation Programme for another financial year, or until April 2016, as “really the nail in the coffin”.
In his analysis of the statement, the former president of the Barbados Economic Society (BES) warned it would “only serve to continue to depress any real growth in the economy” and contradicted any notion that the programme was working.
“You can’t tell people they are going to pay more taxes by extending those measures and expect the economy to grow as well. So the accumulative impact of that is that your disposable income will be further eroded overtime with prices increasing,” warned Straughn.
Likening the extension of the Municipal Solid Waste Tax and Consolidation Tax to decisions taken two years ago on the Value Added Tax (VAT), Straughn expressed concern that taxpayers would no longer be able to “plan for getting that little boost in their disposable income from April” next year.
“Therefore the possibility of growth returning diminishes and makes it that much more difficult. So I don’t see [the extension of the taxes] working.”
He further pointed out that controlling expenditure had always been the problem for the Government, saying it “simply isn’t moving fast enough on the expenditure side of its account and that would really make a difference”.
“Everything that we are dong incidentally is centered on the language he [the Minister of Finance] uses, which is protecting the reserves and protecting the dollar and that sounds good, but the consequence of that and that ultimate strategy is essentially to depress the economy, and if you are depressing the economy then it means that businesses are not profitable.”
Furthermore, he said “people will not invest in places where businesses are not profitable unless of course they get a lot of concessions.
“It really is not a win-win. So I don’t see the extension of the taxes doing anything but hurting the economy,” he warned.
Stating that a revised target of up to 7.2 per cent of GDP instead of 6.6 per cent was “not noble”, Straughn said despite giving some figures in relation to targets, more information was needed on the current state of the economy since what was given was not sufficient to paint a true picture of what was currently happening domestically.
The economist also lamented that the ministerial statement would not serve as a confidence booster for people going into 2015.
Shifting his attention to the list of construction projects, mainly hotels, to come on stream next year, Straughn said he hoped they did not turn out to be like other projects that were announced in previous years that either came to a halt or did not get started.
“The truth is that I don’t think the public, from an economic standpoint, can deal with any more disappointment. So I think that when one listens to the entire thing, the fact that the taxes will be extended for another year and there is a new list of projects that are supposed to come on stream in 2015, I would dare say that Barbadians should proceed with caution.
“You still have to live your life the best you can at this time within the context of relative uncertainty. I wouldn’t go out on a limb and say that everything is rosy. The conditions for growth I don’t think are there [although] the minister and his advisors seem to think otherwise,” said Straughn.