Year in Review: Again not business as usual
Disappointing and turbulent are how economists have described the Barbados economy for 2014. During the year the island’s subpar growth and deteriorating fiscal health was met with closure of some private sector entities, mass retrenchment of Government workers,
a rise in the unemployment rate and two downgrades.
The unsuspecting public was also hit with new taxes. And were later told that those taxes, which should have come to an end this fiscal year, would be extended for yet another, or until April, 2016. These developments attracted widespread criticisms of the Government by residents, concerns about social ramifications and some level of international attention.
The emphasis throughout the year was on the Government’s Fiscal Adjustment Programme, which was designed to help the Government raise revenue and cut expenditure. However, that seemed like an uphill task as the Government struggled to close the fiscal deficit and improve its revenue collection methods.
And although there was belief among some that confidence had fallen within the business community, others remained upbeat that the economy would attract needed investment and record measureable growth. Despite the beating the economy received throughout the year the Government remained optimistic, reporting that the fiscal programme was working and the economy would begin to see growth.
There is no doubt that 2014 will be considered one of the most difficult years for businesses, individuals and the Government of Barbados.
“It was a very turbulent year,” president of the Barbados Economic Society (BES), Jeremy Stephen, told Barbados TODAY, as he reflected on the highs and lows of 2014. In fact, Stephen said the society did not believe there would be any “immense growth” recorded for 2014, adding that “if we are lucky we would probably do a 0 per cent or a 0.1 per cent, which hardly helps anybody”.
Fresh from an almost equally difficult 2013 the Governor of the Central Bank of Barbados, Dr DeLisle Worrell, in his January Economic Performance Review, forecasted growth to “accelerate slowly from less than one per cent in 2014 to about 1.6 per cent in 2015 and between two and three per cent thereafter”. This growth forecast, he said, was based principally on expectations for the tourism sector and major investment projects planned by the private sector and Government.
In his second economic review, Worrell reported that forecasted growth rates were less then 0.5 for 2014, two per cent next year and 2.5 per cent in 2016. However, in the half year report the Central Bank projected “slight growth” of about 0.3 per cent in 2014, with 1.2 per cent in 2015 and 2.5 per cent in 2016. That then changed at the end of September when the island’s lead economist said growth was forecasted for 2015 in the range of two per cent and 2.3 per cent in 2016. He did not say what the prospects were for 2014.
Looking back at 2014, Stephen commended the Government for “sticking to a path”, but said there was too much delay when it came to making the various budget cuts. Stephen believed that in 2014 the private sector showed too much reliance on Government in order to make decisions.
“Yes, a lot of companies have a large percentage of domestic customers, but at the end of the day more time should be spent not worrying about Government policies . . . . So this past year I thought that the private sector was not aggressive enough in going after opportunities. That is, the top-line established private sector,” he said.
However, he has been “very encouraged” by the level of entrepreneurship during the year under review.
“There have been a lot of innovation and a lot more technology-dependent companies that have come up this year alone,” said Stephen, adding that his hope was that the momentum was kept in 2015.
“The Government will not be able to do much for us. It is up to the Government now to prove that it can close some projects. But a lot of this recovery will be contingent on if they can actually get the funding for some projects to start. If they can’t then this will persist . . . . Please continue to do what you are doing in the interest of your families, try to find some export markets as much as possible, get online and try to secure the interest of your families, engage in multiple income generating activities wherever you can. We will get through this,” encouraged Stephen.
Throughout the year the International Monetary Fund (IMF) was on the tongue of many as that Washington-based firm kept a close eye on the economic developments here. And, in June, a team from the IMF reviewed the island’s economic developments and discussed the main policy priorities. Following that assessment and meetings with the Minister of Finance, Governor of the Central Bank and other Government, labour and private sector officials, the IMF said the economy continued to face major challenges, including low growth, a very large fiscal deficit and a high debt burden.
Throughout the year Barbados continued its engagement of the IMF for technical support, with the IMF issuing a number of recommendations regarding tax and other reforms. Also in 2014, discussions regarding a number of ideas for economic growth came to the fore, the most prominent being the Alternative Economic Plan put forward by Dr David Estwick.
And in the last quarter of this year, the Government was thrown a lifeline to help raise foreign exchange through the issuing of bonds, an idea that was almost immediately dismissed by most residents. In his assessment of the economy for 2014, economist Ryan Struaghn said “from a individual point of view and from a business point of view I don’t think the year turned out the way that people thought that it would have”.
“A number of projects that were cited to come on stream did not come on stream, and again that also waned in confidence. You had the introduction of new taxes, including the municipal tax, which from all reports were not well received,” he said.
“There was nothing particularly positive about this year in terms of the economy that you could point to and say ‘That sector has done really well this year’. When you cannot point to at least one sector in the economy that would have done well it really is cause for concern,” said Straughn, adding that the Government should have seen some measurable success throughout the year following the slow implementation of its fiscal programme.
And he said while Sandals brought some considerable amount of activity, it could be considered a disappointing year for the construction sector.
“Equally so a lot of people still have not received their income tax refund, which, from a personal household point of view, you have paid your taxes, municipal tax included . . . . So you are in a situation here now where you may have not received your income tax refund but you are still required to pay your municipal tax,” said Straughn.
“The system of itself right now, I don’t think from a tax point of view, is working as it should, and then that may very well lead to a lack of confidence, which means less business, which means less growth next year. When you put all of these things together, 2014 really I don’t think anybody would have expected it to turn out the way it did . . . . So 2014 in my view has not been a good year for businesses, it has not been a good year for consumers and it has not been a good year for the economy by extension . . . . So 2014 unfortunately will not be a good year in history,” added Straughn.
There was good news for the tourism industry. There were signs of increase in tourist spend, strong forward bookings and an almost bumper winter tourist season. This was coupled with the announcement that Sandals had recruited approximately 600 Barbadians to start working when the hotel opens in January, 2015.
Another significant development in 2014 included the announcement by Cable & Wireless Communications (CWC) that it had brokered a deal to purchase Columbus International.