Governor comments on Barbados economy

Governor of the Central Bank of Barbados, Dr. DeLisle Worrell says tourism- related investment will impart some stimulus to the local economy this year, but this effect will be largely eroded by the fiscal contraction, and the forecast is for growth of less than one per cent. In an opinion article commenting on the current status of the Barbados economy, Worrell said the recent economic performance has been commendable given the unprecedented recession in the markets for the island’s tourism and traded services. He said the Central Bank protects the value of the local currency by intervening as necessary on the interbank market. “Up until April this year, Barbados’s foreign exchange reserves were the equivalent of 19 weeks of imports.  By September, reserves had declined to a little over 13 weeks. In response, the government took action to introduce a major budget correction in mid-August.” He said the measures included expenditure cuts equivalent to about three per cent of gross domestic product (GDP), plus additional taxes of about two per cent. Worrell said in December, additional measures, including job cuts in the public sector, were introduced to reinforce the effect of the August adjustments. “Projections are for a deficit equivalent to five per cent of GDP for fiscal year 2014/15, when the budget cuts will have full effect. Tourism- related investment will impart some stimulus to the economy in 2014, but this effect will be largely eroded by the fiscal contraction, and the forecast is for growth of less than one per cent,” he said. “Fiscal consolidation continues into the medium term, and the ratio of net public sector debt to GDP is expected to peak at about 67 per cent of GDP in 2015, and decline thereafter. The ratio of external debt service to earnings of foreign exchange is projected at eight per cent for 2014, and to remain at about 10 per cent for the foreseeable future,” he added.

Courtesy: www.cananewsonline.com