ONLY LAST WEEK, the Governor of the Central Bank of Barbados presented his report on the performance of the local economy and noted that economic growth in 2014 was a mere 0.3 per cent. He also hinted at a two per cent growth rate in 2015 on account of millions of dollars in potential investments.
Hence, improved performances in tourism and construction are likely to play the key roles in promoting growth within the economy in the next few months.
Given the apparent stability in the foreign reserves and the removal of any threat of a devaluation of the local currency, can we in Barbados rest comfortably that the economy is finally about to recover on account of a forecasted growth rate of two per cent in 2015?
Further, if other economies in the region are expected to grow in the current year, should we the people accept that a Caribbean economic recovery is under way?
This author would be the first to admit that given the recent financial and economic experiences of many of the countries in the Caribbean, and the fact that there is very little fiscal space for them to manoeuvre, the achievement of positive rates of real economic growth is a fundamental requirement for the restoration of macroeconomic stability throughout the region. This is since it would provide a platform for improvements in the fiscal situation facing countries without them having to resort to higher marginal tax rates on both the direct and indirect sides.
But anyone with some familiarity of the concept of economic development would understand that when it comes to the transformation of our economies, economic growth is but only one critical aspect. in addition to other key economic indicators such as unemployment, inflation and public debt, there are also issues pertaining to things such as the distribution of income and wealth, the diversification of economic activity, and the standard of living that must be incorporated into the analysis.
Hence, unless most of these matters are addressed and resolved, we in the Caribbean ought to proceed very cautiously when it comes to the notion of economic recovery.
Going forward, we first have to determine what, based on all available information, constitutes economic recovery.
For example, even with strong economic growth rates, are we satisfied with the quality of jobs being created? Are we comfortable with the level of wages and salaries paid to existing as well as new entrants into the labour force? Are we at ease with the existing distribution of income within the society based on a quantifiable indicator such as the Gini coefficient?
Are the investment projects undertaken capable of generating sufficient income in the long term to realise adequate returns on the capital injections? Is sufficient being done to diversify our economies to make them less dependent on a few sectors or industries such as tourism and construction?
You see, unless such questions are posed and satisfactorily answered by us as a people, we may very well find ourselves in situations where our economies are growing but fundamental issues that point to ‘real’ recoveries are constantly being ignored. The net result would be a simple case of while the grass is growing the horse is starving. And that would be a very sad tale indeed – one that every Caribbean country should seek to avoid at all cost.
Email: bfrancis@uwichill.edu.bb
