Despite the dramatic improvement in the tourism industry, especially a 14 per cent increase in long stay arrivals so far this year, the Barbados economy grew by a marginal 0.3 per cent for the first nine months of the year, according to the Central Bank of Barbados, in its latest economic press release.
The major reason has been the construction sector, which the bank said “fell short of expectations” and the spin-off effect this had on the retail and domestic services sectors.
Also holding back the economy were what the bank termed “administrative issues” which had caused the emerging photovoltaic systems sector here to stall, with only a quarter of around 8 megawatts of new capacity fully operational.
Net new foreign capital inflows were estimated at BDS$417 million (US$208.5 million), down from BDS$542 million (US$271 million) a year ago, while foreign income from services, including international business and financial services, were on par with last year.
If you are hoping for some brighter news for the economy apart from tourism’s improvement, you won’t find it in the growth of the economy but in the decline of oil prices. The country spent BDS$144 million (US$208.5 million), or about 20 per cent less on fuel although the amount brought in increased by 8 per cent.
The lower cost of fuel – a result of the global oil war now being waged over who will command prices for the commodity in the future – not only saved Barbados foreign exchange, but lowered the cost of living for everyone on the island.
Said the bank, “The dramatic fall in payments for imported fuel and lower commodity prices have had a major impact on Barbados’ inflation rate.”
It noted that while the average costs of domestic electricity and fuel have declined one per cent per year in the past three years, they had fallen by 20 per cent during the first seven months of this year.
In addition, said the Central Bank, inflation in domestic food prices fell by two per cent on average for the year ending July 2015, down from an average of four per cent between 2011 and 2014, at what it termed “the height of the world commodity boom.”
Overall, for the first half of its current fiscal year, that is, from April to September, the government deficit was BDS$19 million (US$9.5 million) less than for the same period last year. This was mainly due to almost BDS$100 million (US$50 million) more collected in property taxes, which were increased to replace the estimated loss in revenue from the now-repealed municipal solid waste tax. It may be remembered that the municipal solid waste tax was expected to raise a total of just under BDS$50 million (US$25 million) over its first year.
Excise taxes rose by BDS$15 million (US$7.5 million), but receipts from the VAT fell BDS$22 million (US$11 million), in part due to industrial action at the Bridgetown Port, which the bank said, delayed the clearing and processing of merchandise imports.
And while the country is pinning its hopes for recovery on tourism’s resurgence, the bank warned that the growth experienced this year was mainly due to what it termed “the significant restoration of airlift capacity from North Atlantic markets last winter season,” and therefore the increases in long-stay arrivals were not likely to continue at that pace.
However, it said, the cruise tourism business would get a major boost from an expansion in the home-porting services at the Bridgetown Port.
Overall, said the bank, “the principal factors affecting the near-term growth outlook are the prospects for tourism and the implementation of major private and Government–funded investment projects.”
It also noted that Barbados’ fiscal deficit continues to grow faster than GDP, with interest costs amounting to 29 per cent of all Government revenues.
If the Government can lower its fiscal deficits to below the growth rate of GDP, it could reverse the slide in the country’s international credit ratings, said the bank.
Courtesy: Caribbean 360