Government’s Estimates of Expenditure for 2012-2013 and the success of the current winter tourist season are expected to be key determinants of Barbados’ economic fortunes next year.
This assessment comes from president of the Barbados Economics Society, Ryan Straughn, who told BARBADOS BUSINESS AUTHORITY that prospects for the economy in 2012 were “bleak” with “not much to look forward to”.
Although projected tourist arrivals seemed positive so far, Straughn noted that visitors had been spending less money and staying for shorter periods.
“Therefore the foreign exchange reserves have not built up as they normally would,” he said, adding that the adequacy of Barbados’ reserves at around 19 weeks of the imports was “the only reason we are not in an IMF programme”.
The president said the reduced visitor spending this year had a dampening effect on other areas of the economy.
This, he said, was compounded by the fact that, with the exception of the International Finance Corporation’s investment in Sagicor Financial Corporation and the sale of Barbados Light & Power shares to Emera Inc., there had been no significant capital inflow during the year.
“A prime example is the lack of investment in Four Seasons. We’ve struggled to attract capital, so tourism has to pick up the ball and run with it,” Straughn said.
With regard to Government’s Estimates of Expenditure, which are due to be presented in March, the economist and management consultant said it was critical that the Freundel Stuart administration addressed its spending.
“It’s possible or even likely that the more than $1 billion in deficit spending will be approved, which means Government will lose credibility in meeting the Medium Term Fiscal Strategy (MTFS),” he contended.
Straughn said this could cause the island’s credit rating to be downgraded.
“This means Government would have to pay more if it wants to borrow, and it is already stretched under its expenditure programme,” he said, adding that there was little room for more taxation.
The president added that the MTFS targets had so far been missed as “in order to meet the targets there must be growth” in the economy.
