In search of the positive
My team challenged me to write more positive articles after my last unpublished one was unanimously rejected by them. That article was a commentary on the recent economic review of Barbados.
This brings me to my topic of the day In Search Of The Positive. That being said, I don’t believe the economic report or the commentary that followed was full of negatives. Indeed there were positives.
In fact, the biggest positive came when Dr DeLisle Worrell stated that our high debt to GDP ratio was in fact a problem. This seemed like a complete turnaround from his comments last year when the governor of the Central Bank of Barbados stated repeatedly, publicly and privately, that our debt to GDP ratio was not a problem.
Dr Worrell qualified his view by stating that our debt to GDP ratio was not an economic problem in and of itself, but posed a problem in accessing the financial markets.
I am still thankful that the Central Bank is now on board with what the financial markets want –– a lower debt to GDP ratio.
As a trader, I have seen a few major central banks and governments out of touch with the financial markets, and can say that never ends well. For it is easier to work with the financial markets than against them.
I now turn to the positives in the economic data, which I am going to assume, as always, haven’t been falsified. We, Bajans, find it difficult to keep a secret, so if the Government was indeed falsifying economic data, we would all know about it tomorrow.
Everyone by now knows that Barbados’ tourism arrivals were up significantly by 14 per cent. I have mixed views on this positive news. While the increase is splendid, statistically speaking, it is unlikely that we would see another 14 per cent jump this year. At the macro level, tourism is expected to have its challenges this year as well; but I am keeping it positive, so let’s overlook those for today.
It is important to note that tourism was highlighted, once again, as being able to drag us to our unofficial target of two per cent GDP growth.
Rising unit labour costs are usually a good sign of a healthy economy. The Central Bank notes that unit labour costs have risen by one per cent each year since 2008,
with no perceptible increase in productivity. Once again, this is good and bad.
The reason unit labour costs can increase over this period of contraction is that companies and Government are laying off their employees at the bottom of the ladder. This alone increases unit labour costs, even if we don’t factor in various companies increasing wages or salaries.
Thus, rising unit labour costs are indeed a bit misleading, but they probably are in fact increasing. I take this time to ask the reader: what happens in Fortune 500 companies when they are failing or missing expectations? I am keeping it positive, though; so moving on . . . .
Construction –– if a sector, or even a country, contracts for many consecutive periods, statistically speaking, it should at some point experience growth. I am not sure
if this is comforting or not. In the financial industry this is known as a “dead cat bounce”.
Hopefully the Central Bank isn’t predicting a dead cat bounce; but rather a full recovery. I couldn’t find the projection for construction growth, at the time of writing this; however, the Central Bank predicts that “tourism and construction should provide enough stimulus to the wholesale, retail and business services to produce economic growth of about 1.8 per cent in 2016”.
Renewable energy usage expanded in 2015 largely owing to solar panels for residential and commercial use. This is the sector I am most excited about in terms of saving valuable foreign exchange and being a positive stimulus for economic growth.
I genuinely hope this article provides some balance, which we all need sometimes. Yes, things are bleak, but it is my belief our economic prosperity is in our hands, and things can and will eventually improve.
(Craig Harewood is the investment director at OurinterestInc., an investment company that trades on global markets, and from time to time assists small businesses and boutique investors.