Monday, April 22, 2024

THE ISSUE: Outside forces that drive us


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Barbadians of a certain age would be familiar with the statement which suggests that when the United States (US) sneezes Barbados catches a cold.

This very often refers to the impact happenings in the US economy and society have on Barbados. It is generally accepted that Barbados is a small open economy dependent on trade with many of the world’s powerful countries, including the US.

With Barbados heavily dependent on Britain for tourists, the above phrase could also be accurately applied in relation to that country.

So that is not unusual or unlikely that an economic recession in North America or Europe could be negatively reflected in Barbados’ own economic performance.

This was a point emphasised by the Freundel Stuart administration in the current economic recession, but one derided by its political opponents as a cop-out.

As Barbados heads towards the end of another year with no economic turnaround in sight, expert and casual observers will reignite their discussion about whether Barbados problems are home grown or influence by external forces.

Addressing members of the Barbados Chamber of Commerce & Industry earlier this year, Prime Minister Freundel Stuart restated the view that world events were hampering Barbados’ economic performance.

“As has been repeatedly acknowledged by economic commentators the world over, the current recession is deeper and more stubborn than any of the recessions referenced above. Indeed, to be a little fairer to the facts, during this recession, oil prices reached as high as $145 per barrel – a far cry from the $3 of 1975; the $17 of 1981; and the $36 of 1991,” he said.

“The 2008 recession has exposed and laid bare the fragility of our economy and its sensitivity to exogenous shocks. Hence the need for restructuring can no longer be postponed. We must be prepared to leave our comfort zones; to leave the security of our accustomed positions.”

“The performance of the local economy is driven by tourism, international business and financial services, and agro-processing. Dependence on two sectors to generate the foreign exchange resources that are vital to the stability and orderly progress of our nation commits our people to risks that have to be avoided or at best, mitigated,” Stuart added.

Many of the countries that like Barbados were in economic recession have emerged from it and are growing. However, some concern remains about the performance of economies in Europe, which analysts said have been negatively affected by conflict in Ukraine.

The fluctuating performance of international stock markets and the price of oil are also areas of concern.

So what are the lessons countries like Barbados can learn from international events which would have affected its own performance in the last six years?

Economists here as well as from international financial institutions have identified the need to diversify the economy, reduce government spending and debt levels as key areas in need of attention. Maintaining that the world economy is still not past the worst, Barbados Government officials have also been hoping for a global economic rebound – the proverbial light at the end of the tunnel.


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