A new year is often expected to bring opportunities, changes and improvements.
But in light of the current global economic situation, many countries, families and individuals may find 2012 to continue this year’s hardships and challenges.
In Barbados the situation may not be much different since our fortunes heavily depend on the economic well-being of our major trading partners.
For example, Bank of England governor Sir Mervyn King has said Britain’s economic outlook has worsened and the economy could stagnate until the middle of next year.
Sir Mervyn also said the eurozone debt crisis was the “single biggest risk” to Britain. The bank has cut its 2011 and 2012 growth predictions to about one per cent.
Delivering the bank’s latest quarterly inflation report, Sir Mervyn said Britain’s economic problems were shared by other countries.
“The immediate impact of the decline in sentiment is that the outlook for growth for the world economy has worsened since August. This is also true here in [Britain], where activity could be broadly flat until the middle of next year,” he said.
Furthermore, if Barbadian authorities were hoping for a substantial rebound in the United States economy to lift their country’s economy of the doldrums, they were advised to think again, in the June 26, 2011 SUNDAY SUN.
Two of the island’s best known economists, Sir Courtney Blackman and Charlie Skeete, advised Barbados to plan for an extended period of slow economic growth in the American economy and avoid any optimism about an early return to prosperity based on what happens in the United States.
Skeete, a former senior economic adviser at the Inter-American Development Bank, and Sir Courtney, first Governor of the Central Bank of Barbados, offered that bit of advice after the United States Federal Reserve, America’s central bank of sorts, cut its economic forecast for the United States in 2011 and 2012 and warned about more joblessness during the next two years.
“In Barbados we should prepare for a long haul and we should not base our plans on the assumption that the American recession will end in two years,” urged Sir Courtney.
“We should base our expectations on a strong recovery in the United States taking much more time to materialize.
“The United States economy is not in good shape. Barbadians should not be filled with optimism. They should just be careful. No one knows when a strong economic rebound would occur in the United States.
“The establishment in the United States is in a state of confusion over the economy and we don’t know how long it is going to last.”
It comes as no surprise, then, that Barbados Private Sector Association (BPSA) head John Williams told BARBADOS BUSINESS AUTHORITY the private sector is expected to be challenged by low domestic demand coupled with “great uncertainty” in the international market.
In the December 5, 2011 edition he said Government and businesses alike will have to restructure their operations and cut costs going into the new year while making strategic long-term investments.
In the same edition, Barbados Chamber of Commerce & Industry (BCCI) president Andy Armstrong said the main challenge in 2012 will be very fragile growth in the economy.
He noted that demand is down in most areas as consumers cut back their expenditure and enterprises reduce or defer spending.
“At the same time many costs have risen, especially in relation to energy. Fuel surcharges for shipping have been increasing, the cost of fuel for vehicles and equipment has risen, and the cost of electricity is much higher than it has been historically.
“It is very difficult to pass on these increases to consumers and so, many companies are in the position where they are making little or no profit,” he said.
Armstrong further added that private sector layoffs may become inevitable if recessionary conditions continue well into 2012.
He said this was the stark reality despite a commitment made almost four years ago to sustain employment “at all costs”.
So far, he said, the private sector had for the most part kept its promise although this meant it had to put new investments on hold and watch profits shrink or disappear.
“Many companies – especially small and medium ones – are not in a position to hold [on] for much longer,” he said.
Meanwhile, rating agency Standard & Poor’s projected growth of 1.5 per cent annually in 2012 and 2013.
S&P credit analyst Olga Kalinina projected a marginal decline in the current high unemployment rate, a “slower pace hovering around 11 to 12 per cent next year”.
Barbadians, already complaining about the steep jump in the cost of living, may not get much relief as S&P expects inflation to be in the vicinity of seven per cent in 2012 and 2013, down from about 7.5 per cent.
Essentially, however, as economist Brian Francis noted in the November 7, 2011 BARBADOS BUSINESS AUTHORITY, no one can predict – with any high degree of certainty – what the global economic outlook may be in 2012 and the immediate years to follow.
He said that predicament is grounded partly in the weak performances of many of the leading economies worldwide and, to a certain extent, in the relatively high levels of uncertainty surrounding the economic prospects for developed, developing and transition economies.
Francis noted that despite these real concerns and fears, small, open economies like those in the Caribbean have few options other than continue trying to weather the storm.
