Friday, April 12, 2024

IDB: ‘Modest’ growth

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A RECOVERING TOURISM SECTOR and lower international fuel prices have given Barbados’ economy a boost, but the island’s medium term growth prospects are “modest”.

And the Inter-American Development Bank is also predicting that a combination of current “weak economic conditions” and Government’s fiscal consolidation programme will “likely” keep unemployment “at the two digit level”.

The IDB gave this forecast in its latest Caribbean Region Quarterly Bulletin, which examined the economic performance of Barbados, The Bahamas, Guyana, Jamaica, Suriname, Trinidad and Tobago and the Organisation of Eastern Caribbean States.

“The island’s medium term growth outlook is modest. The Central Bank estimates output would increase to one per cent in 2015, which is in line with the [International Monetary Fund] forecast. The decline in international fuel prices would have a positive impact on growth. These figures also take into account the increase in airlift and a better than expected winter tourist season,” the bank said.

“At the same time, the dynamism of the economy would depend on sustaining the improved performance of long stay tourist arrivals, and the associated spending per tourist. New tourism related capital projects may have a positive impact on construction and boost domestic demand.”

The IDB noted that the fact that “the tourism sector is starting to show signs of better days to come” was a recent positive development for the Barbados economy.

“At the same time, under the Government’s fiscal consolidation programme, through the introduction of new tax measures and the decline of expenditures, the fiscal deficit declined and a balanced primary budget was achieved in [financial year] 2014/15,” it added.

“However, current public spending and debt levels remain high and interest payments continue to rise.”

One positive thing the banks said Barbados should expect was continued low inflation, an outcome influenced by low oil and commodity prices, which mean inflation would be contained at around two to three per cent.

“The lower international commodity prices coupled with weak domestic demand would have a moderating effect on inflation. The Central Bank estimates that at the end of April 2015, imports fell by 14 per cent, due to significant declines in fuel costs (40 per cent) and food and beverages (five per cent),” the IDB noted. In terms of the regional economic picture, the bank said: “Weak economic growth continues to challenge the tourism dependent countries in the Caribbean. Conversely, the growth outlook remains strong in Guyana and Suriname.” (SC)

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