Central Bank reports on performance of economy
The Barbados economy grew by half of one per cent during the first half of the year, primarily due to a good performance by the key tourism industry and remains on course to achieving projected overall growth of one per cent for 2015.
Central Bank Governor Dr DeLisle Worrell made the disclosures today in a video statement reviewing the island’s economic performance. Looking ahead over the next three years, he said growth should continue on an upward trend, rising within a range of two to 2.5 per cent annually over the period in question.
“Tourism and construction should be the main drivers. Recent efforts to enhance the tourism product and enrich the visitor experience are beginning to take effect,” said Dr Worrell, one of the Freundel Stuart Government’s key economic advisors.
He noted: “Public sector investment projects already underway and projected over the next three years total $567 million. Private investment in hotels and tourism-related projects over the same period, are expected to be about $2 billion. The growth of green-energy production has the potential to accelerate the overall growth rate, if installation can be ramped up significantly.”
Worrell also reported that measures outlined by Government in the recent Financial Statement and Budgetary Proposals had led to an adjustment of the forecasted deficit target from six per cent of GDP (gross domestic product) to around four per cent of GDP for the current financial year 2015/2016.
In fact, during the first three months of the current financial year which started on April 1, he said the fiscal deficit was down to $221 million because of significant spending cuts.
“Total expenditure fell by approximately $4 million. Spending on goods and services decreased by $14 million, and wages and salaries fell by $2 million. There was no increase in transfer to public institutions,” he pointed out.
However, Dr Worrell reported that interest payments and outlays on capital expenditure had risen by an estimated $8 million and $12 million, respectively. Meanwhile, total revenue was lower by $33 million and Value Added Tax (VAT) and personal tax receipts fell by $14 million and $22 million, respectively.
At the end of June, the foreign reserves stood at $968 million or 14.4 weeks of import cover, down from 16.1 weeks at the end of March 2015.
“The foreign exchange market was almost in balance, with a slight dip in reserves recorded during the second quarter,” said Worrell.
“Foreign exchange outflows fell by $60 million, primarily because of lower fuel costs. Payments for fuel imports were $171 million lower than for the same period last year. Private capital inflows for the first half of 2015 were $372 million higher than the average for 2008 to 2013,” he added.
Worrell said the financing of Government for the April to June period of the current fiscal year was predominantly provided by the Central Bank and commercial banks to the tune of $140 million and $113 million, respectively.
He also stated that the strong demand by private individuals for recently issued Government savings bonds had demonstrated “a renewed confidence in government security”.
“With an increase of $89 million in excess liquidity, in the form of commercial banks’ reserves on deposit at the Central Bank, the net effect from the Central Bank financing was an increase in money created of $51 million,” revealed Worrell.
“The successful relaunch of the Government savings bonds programme in June this year brought funding of $40 million by June 30, while the National Insurance Scheme funding of the deficit remained virtually unchanged. The net public sector debt was equivalent to 67 per cent of GDP at the end of June, two percentage points lower than the corresponding period one year prior,” said Worrell.