Not adding up
Private sector challenges Central Bank report
The private sector is taking issue with the economic figures released yesterday by the Central Bank of Barbados (CCB), concluding that the numbers simply did not add up.
Central Bank Governor Dr DeLisle Worrell reported that the economy grew by 1.3 per cent for the first six months of this year compared to 0.5 per cent or “virtually no growth” for the same period last year.
Worrell explained that unexpected delays in the implementation of major tourism projects and a five per cent expansion in tourism which was “marginally lower than for the first quarter”, along with external debt service requirements, had resulted in a drop in international reserves by $43 million to $884 million.
He added that Government had to depend on Central Bank financing for the first six months of this year, and that between April and June the fiscal deficit widened by $28 million to $204 million, while the primary surplus fell by $14 million.
Revenue of $563 million was down by $25 million, Worrell said, with Value Added Tax lower by $13 million and personal income taxes down by $17 million.
The fall in income tax revenues was a concern for President of the Barbados Economic Society (BES) Jeremy Stephen who told Barbados TODAY the Governor’s
figures were not consistent with an economy that had recorded growth.
“Personal income taxes have fallen for Government and that is an issue,” Stephen said. “That is not necessarily commensurate with an increasing economy, but again a lot of that was driven by tourism and just arrivals, and how arrivals are modeled in terms of the relationship between arrivals and the general growth in the economy.
“It is estimated that the economy [had] grown, but the evidence isn’t shown in terms of Government revenues just as yet,” the BES head added.
President of the Barbados Chamber of Commerce and Industry (BCCI) Eddie Abed also questioned the numbers.
Abed said the reported 1.3 per cent economic growth suggested the economy was moving in the right direction.
However, a skeptical Abed said he was surprised that while there was an increase in tourism arrivals and tourist spend, there was a decline in revenues.
“When I look at the outflows they didn’t seem to be much higher than previous years to account for the large difference between the level of foreign exchange last year versus the level of foreign exchange this year. So I am not sure as to why the foreign exchange is showing such a large disparity between last year and this year,” the businessman told Barbados TODAY.
Worrell reported yesterday that private financial inflows were $87 million higher than for the first half of 2015 due to inflows for hotel development projects, real estate purchases by non-residents and a large foreign purchase of a local firm. He said external amortization and equity payments resulted in net public outflows of $82 million, compared with a $189 million outflow last year.
The Central Bank’s chief executive also revealed that “foreign exchange outflows will be tightened by the measures to be announced in the forthcoming budget”.
Abed said he took issue with the disclosure and checked with the Minister of Finance Chris Sinckler this morning, who gave him the assurance that “there will be no restriction to access to foreign exchange” in Barbados.
Meanwhile, outgoing chairman of the Barbados Private Sector Association (BPSA) Alex McDonald told Barbados TODAY he was not surprised by the economic report given the delay in “major building projects”.
McDonald had predicted at the start of this year that if those projects had not begun by the middle of this year confidence among private sector officials could “slump again”.
The departing BPSA head repeated this position today, painting a dim picture of the confidence level among local businesses.
“We were depending a lot on these buildings to start in terms of employment, ordering goods and services and so on to support them,” McDonald said.