Which way for the economy?
Following the conclusion of the annual Budget debate in the House of Assembly early this morning, can we truly say that the average Barbadian, who makes up the majority of the population, is any wiser in terms of having a better understanding of the economic predicament in which Barbados currently finds itself?
Frankly speaking, we believe the answer is no though every Barbadian knows, from day-to-day experience, that things are not as bright as they used to be. If anything, the average Barbadian is probably more confused because the three-day debate, the scheduling of which meant it had to compete with the Rio Olympics for public attention, would have essentially reinforced the existing fundamental difference of opinion on the issue, at least from a partisan political standpoint.
On one hand was the ruling Democratic Labour Party (DLP) making the point that the situation, though difficult, is not as bad as some local critics, especially in the Opposition, are saying and also when Barbados is compared with other countries. Though he eventually voted in support of the resolution, Minister of Agriculture Dr David Estwick presented a differing view which questioned the current approach to solving the crisis from a policy perspective.
The main thrust of the Opposition Barbados Labour Party’s (BLP) argument, on the other hand, is that economically speaking, this is the worst it has ever been in Barbados – at least in living memory – and it has little to do with an unfavourable external environment as Government spokespersons have consistently argued, but more to do with the DLP administering the wrong medicine and undermining opportunities for major growth.
However, given the high level of credibility which he continues to enjoy on economic matters stemming from his professional reputation as an economist, it was former Prime Minister Owen Arthur’s analysis that probably had the most impact.
Arthur, who now sits as an Independent Member of Parliament after resigning from the BLP about two years ago, posited that Government was taking the economy along the wrong path, taking particular issue with the printing of money by the Central Bank to finance the huge public sector deficit which is at the centre of the national economic problem.
“We are facing a very, very dangerous problem,” Arthur said, expressing particular concern about the slippage in foreign reserves. He also referred to the effect of increasing taxation within a shrinking economy, as the Government has done, saying this approach ran counter to the objective of increasing revenue to close the gaping financing gap.
There were mixed assessments from private sector spokespersons. Those interests which got what they were hoping for in terms of support, like the tourism and small business sectors, were basically happy. Those who were not so lucky and hit by the measures, like the banking sector, were not happy. However, what is pretty clear when all the differing perspectives are analyzed is that the Barbados economy remains in serious trouble, even though it has started to grow again following seven years of decline and stagnation.
A major challenge which this Government has faced, especially with the private sector, relates to a lack of confidence. Some of it is attributable to the actions of Government, especially saying it would do one thing and proceeding to act to the contrary as happened in quite a number of instances.
It is debatable to what extent, if any at all, that this Budget might have helped to address the issue. A high level of private sector confidence in Government’s economic policy is critical. It is business activity undertaken by firms which contributes to the generation of economic growth, the overriding objective of Government.
The Budget was also seen by some commentators as a move towards favourably positioning the ruling DLP in preparation for the next general election which, constitutionally, is a year and a half away. This view would have stemmed from announcements that eligible temporary public officers would receive permanent appointments, a monthly 40 dollar increase in old age pensions, and five million dollar national clean-up programme that would provide employment for dozens of persons, among other things.
If the Government is indeed thinking of calling and early election, it could be an indication of a number of things. It could be a case, for example, of attempting to seize a political advantage or it could be a case of asking voters to give their verdict on the economy by choosing the party which they consider better suited to effectively address the existing challenges. Who knows but it also could be that the Government quietly may be getting tired of the constant harsh criticism.