Our biggest challenge in 2012 will be dealing with the current account deficit. It will be a problem because 2012 will be the precursor to elections due by April 2013.
With only a three per cent margin separating the parties, it will be interesting. The longer we delay the coming elections, the more difficult it will be for Government since all things point to a civil service reduction.
If the civil service and ancillary transfers are not dealt with, our position vis-Ã -vis the outside world will be uncomfortable. If it is uncomfortable, it will affect the rating that agencies give us and thus our ability to borrow and attractiveness for investment.
Are any big debts falling due?
Our foreign exchange has held fairly steady despite the difficulties from 2008 and the fall-off in tourism. This is because there has also been a fall-off in local demand as the measures imposed by Government and the 17.5 per cent VAT bite.
We have just over US$500 million and the only thing that will substantially reduce that is the uncertainty about oil prices and the impending chaos that is posed by the goings-on in Iran.
Government’s insistenceon bringing the National Insurance Scheme’s (NIS) funds to bear on Four Seasons will certainly create some employment in 2012. Perhaps that is the overarching reason for the unpopular decision.
It is obvious that the Minister of Finance does not want to use his powers under the law and this leaves the board in an unenviable position.
However, the loan will be granted and this will provide fodder for the project that I predict will escalate in cost and Government will be sucked in, thus possibly furthering the deficit.
It seems unlikely that in 2012 new investors will be forthcoming as those with deep pockets may be more interested in manipulating markets in confused Europe where interest rates are wreaking havoc on countries.
So there will be some job creation as Four Seasons restarts, but that will only partially effect the job situation as Government will still be faced with the decision whether to lay off or not lay off in the face of 12 per cent unemployment (or more).
As things get even harder among the youth and another batch of students leave school and seek work, we shall see more pressure on the police and law courts as deviant behaviour will prevail.
In 2012 the cost of living should increase. This will have the greatest impact on the middle class. Those with mortgages and car loans and high credit card balances with interest rates over 35 per cent (unless the Central Bank steps in) will find life hardest.
It will be a hard year for Barbadians with Government unable to do much to alleviate the situation. Barbadians will be hard pressed to survive the ravages of the world crisis, the genesis of which was the greedy perpetrators of toxic mortgages in the United States.
But the economy of Barbados is small and to a certain extent flexible; some would say malleable. We have been given good advice by Governors of the Central Bank: seek niches and reduce the public sector and subsidies. I say be less political and serve the constituents. Â
There is a theory that every 7 000 years or so the earth’s axis changes. We are said to have reached that point since the last convulsion.
It may yet happen and Kenya is expected to be above water. Barbados may still be above water too.
Whatever happens, the obdurate character of Barbadians will weather the storm.
