Not so fast!

CDB cuts Central Bank’s forecast in half

Forget the Central Bank Governor’s projection of 1.8 per cent economic growth this year!

The Caribbean Development Bank (CDB) said today it expects the average rate of growth in the Caribbean for 2016 to be in the order of 0.3 per cent, with Barbados coming in at 0.9 per cent, half of what Dr Delisle Worrell forecasted about two months ago.

Addressing the CDB’s annual media conference this morning, Director of Economics Dr Justin Ram further poured cold water on the Government’s forecast by stating that the island was not expected to be among the leading performing regional economies for 2016. The top three are the Turks and Caicos Islands, which is due to record the highest rate of growth (5.4 per cent), followed by St Kitts and Nevis at 4.5 per cent and Dominica at 3.9 per cent economic expansion.

Justin Ram & Warren Smith
Justin Ram & Warren Smith

In all, 13 of the CDB’s 19 borrowing member countries are expected to show faster growth this year than they did last year, while Trinidad and Tobago and Suriname are expected to experience negative growth.

In Barbados’ case, Ram suggested that the desired growth would remain elusive unless the Freundel Stuart Government implements significant structural reforms and drives down the current debt-to-GDP ratio, which stood at approximately 131 per cent at the end of last year.

He further cautioned that despite its record level of tourist arrivals, the island simply was not raking in as much as it did in the past from its number one sector.

“So really there needs to be a programme to get greater value added out of the tourism product,” the CDB official said.

In comparing Barbados’ performance with that of other regional countries, he suggested that “structural problems” and “structural deficiencies” were also responsible for the low ranking.

In addition, he said Government’s ongoing austerity programme, as well as recent public sector layoffs were “now feeding through into the economy.

“So we expect that will have a somewhat negative impact on growth and hence the reason for the low growth forecast in 2016,” added Ram.

Pressed by Barbados TODAY on its 0.9 per cent projection, which flies in the face of the Government’s revenue earning measures and the Central Bank’s touting of its strong reserves, Ram explained that the revenues “had to come from somewhere”, while suggesting that there has been “a sort of a diversion of the resources away from perhaps productive uses towards the Government.

“How the Government decides to utilize those resources we actually wait to see, but remember that currently the Government is really into an austerity drive and they are trying to minimize and reduce the growth in expenditure. So we do not expect the Government to boost their expenditure significantly in 2016 although they might receive additional taxes,” he added.

Pointing out that the island’s debt-to-GDP ratio was double the CDB’s recommended 60 per cent maximum, which is

“quite high”, Ram stressed the need to bring it down in order to have “a sense of stability in the policy environment”.

“And when we actually have that sense of stability in the policy environment we will then expect to see a boost in investment and then in time, in consumption. So for 2016, yes, the forecast is a bit low but if the Government implements significant structural reforms and maintains the path to bringing that debt to GDP ratio down, then, in time, we expect the policy environment to support further investment and ultimately consumption within the economy,” he added.

As for the Caribbean on a whole, the CDB official said the region faced a number of risks, including the possibility of a global economic downturn, political uncertainty in Venezuela, weather-related events, as well as continued warming of relations between the US and Cuba.

“Commodity exporters will need to make difficult decisions about their expenditure patterns,” he said, while also sounding a warning that a reduction in “correspondent banking” relationships also posed a threat to financial transactions and trade and remittance receipts.

Also addressing the press conference, CDB President Dr Warren Smith warned of a possible economic weakening in Europe and North America; a slow economic growth rate in China, as well as the impact of climate change on social infrastructure, concluding that though Caribbean economies were largely in recovery mode, it was happening at a time of “great uncertainty in what is emerging as a somewhat topsy-turvy external environment”.

In the face of these threats, Ram said the focus must be on building “dynamic, export oriented, competitive, inclusive, diverse and environmentally resilient economies”.

This, he said, could be achieved through private sector-led growth; a more educated and flexible labour force; regional integration; as well as a sustainable energy plan.

Today, CDB officials also stated that labour market reforms, fiscal consolidation and human capital development programmes were key to growing the regional economies.

And they called for the issues relating to youth unemployment, regional integration and free movement of CARICOM nationals within the region, the difficulty in doing business in some territories, logistics and travel within the region as well as the difficulties faced by small and medium sized enterprises in accessing finance, to also be addressed.

11 Responses to Not so fast!

  1. Sunshine Sunny Shine February 25, 2016 at 3:06 am

    Well, the governor of the Central Bank is in the habit of placing padding where none is needed. I guess he figured dropping a few more digits behind the real rate was no big deal. I really wonder if anyone who is affiliated with the ruling party knows what telling the truth sounds like.

  2. Harry February 25, 2016 at 5:09 am

    How can anyone take the words of the CB G seriously when he has been proven incorrect year after after?

  3. Tony Webster February 25, 2016 at 6:00 am

    If certain people (C.P.) told me , hand on bible, that the sun was coming up tomorrow morning, I would ask them to swear that in front of the Chief Justice…and The Hangman…(effin we still got one) with God as witness. And I would video-tape it for use as evidence later, when all C.P. Meets His Maker.

    Truth died a looooooong time ago…on the altar of expediency. Maybe it’s a congenital thing…born without a conscience?

  4. seagul February 25, 2016 at 7:42 am

    Now we can see that we need the policy of referendum to evict those people who has proven to be incorrect each year. The framework of Direct democracy is needed now.. Ty Ajani.

  5. BaJan boy February 25, 2016 at 8:02 am

    Now we know that all of Dem politicians continue to say what they think people want to hear just to sound good. They have all continued to in election mode and play Russian roulette with the lives of our people. The unfortunate thing is that all of them are now enjoying a better life than any of them ever had while at the same time our people are even dying just because they cannot afford common medication and they have significantly reduce the medicines on the formulary.

  6. Olutoye Walrond February 25, 2016 at 8:12 am

    The word ‘forecast’ is an irregular verb and as such does not add
    E D in its past tense.

  7. seagul February 25, 2016 at 9:01 am

    Despite its record level of tourist arrivals, the island simply was not raking in as much as it did in the past from its number one sector..which means that the hoteliers are the only earners. Let’s be clear and honest. There are no programmes of value for the working poor. Our structural problems lies among the greedy rich on our island.
    Our democracy is plain for all to see–a Hypocracy of corruption.

  8. Bupps February 25, 2016 at 10:07 am

    Hal the googly govenor has suspended press conference where he interacted directly with the media. Instead we the population are treated to canned YouTube presentations and discussions with a selected group of journalist and private sector representatives.

    The only journalist who presents any analysis of the quarterly and other reports is Pat Hoyos.

  9. B. P. Appia February 25, 2016 at 11:08 am

    Budgeting and economic forecasting are not scientific (although they may be based on fundamental theoretical propositions), but are tempered by artful judgment. The CB forecasts are subject to change over time; so it’s a question of whether the CDB has reviewed the same set of data and assumptions or arrived at their outlook with others. I hope the CB Governor’s analysis is not overwhelmingly politically motivated, since the work of the Bank must be in the national interest (and not that of any political party). When all is said and done, I have confidence in the Central Bank’s economic management and Barbados’ emergence from stagnation to robust growth. Excuses be gone, however!

  10. jrsmith February 25, 2016 at 11:15 am

    To the Director CDB and others, others with they varying forecasts giving us paragraph, after paragraph, line after line of media print, (Why cant a group of you people sit together and come up with a formula which can be presented to government, its all talk show on the soap box, ..One major issue in Barbados with our politicians/Government ,they have no ideas beyond tourism they are not business minded people, they are just a bunch of party polical people.. trying this ,trying that hoping something works.

    Barbados a little island with too big a political non productive infrastructure.. What everyone fails to tells although tourist numbers increase , this made no difference to the change which if occurred 3 decades ago would have show the difference, because the economics of Barbados was better and stronger then. this time around the increase barely excited the domestic market, because Barbados has become an over priced over developed tourism market, challenge by the fact others in the region can offer to the markets similar packages at cheaper prices. The industry in Barbados must drag themselves into the 21st century, most of them are dinosaurs. Nothing will change unless they get the market right..

    In the past the local market would have filled some blanks along with others from the region as to the varying seasonal changes in Barbados , but the local market cannot afford even outside the tourist structure to fill that gap, because everything has become more expensive, also bearing in mind the one way financial traffic , profits out of the island..

  11. Hamish Watson February 26, 2016 at 8:35 am

    When will we accept that it is not the number of visitors that matters but rather the amount that each spend while on the island


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