IN LAST WEEK’S ARTICLE, it was noted that “the evidence shows that the economy has gone downhill over the last eight years”. This brings me to the turnaround, which means a U-turn.
“Imagine that the economy was at the top of the slope that brings us from Cave Hill to the big and confusing roundabout at Warrens. The decline represents the fall in the economy since 2008. The economy is now at the roundabout.
This means that a turnaround is suggesting that the economy entered the roundabout and has U-turned to come back over the slope/hill.”
The Barbados economy remained in recession for much too long because of the failed policies of the Government. The economy is still smaller now than it was in 2007. The foreign reserves at the Central Bank are less than they were nine years ago. The unemployment rate is higher.
It remains a mystery why the Government refused to introduce a reasonable stimulus package when the foreign reserves were healthier in the latter half of the first decade of this century. There were some strange objections to a suggested stimulus by the Government’s economic advisers at the time. These same individuals are apparently now in favour of some kind of stimulus to the economy.
The local policymakers are more concerned about number crunching than the International Monetary Fund. Once the targets for the fiscal deficit and the foreign reserves are not met, the Government imposes more taxation as its cure. It has done some very unusual things to take spending power away from Barbadians – tax incomes, tax expenditure, tax assets and reduce deposit rates at the commercial banks, to name a few.
Furthermore, based on the number crunching, the public is first informed by the governor of the Central Bank of pending increases in taxation, long before the minister of finance. The policies have contributed to making the economy smaller, while not preventing the national debt from doubling.
At the household level, personal incomes have declined as salary increases were not forthcoming and property values fell, thus making less equity in mortgages available. The quality of life has consequently fallen for most Barbadians.
Rate down
Notwithstanding the lack of genuine economic recovery, after eight years of decline in the unemployment rate in the first quarter, it would not be surprising to learn that the rate has inched down in 2016. The growth in tourist arrivals in 2015 must have some effect on employment in the sector at some time.
Therefore, notwithstanding the dramatic decline of the sugar industry and its negative impact on employment in the first quarter, it is about time that the tourism sector picks up some of the slack.
However, an unusual and perhaps unintended occurrence apparently caused some job creation in the tourism sector during the last winter season that does not bode well for the sector going forward. The occurrence is evident in a definite shift in emphasis to the South Coast tourism as Barbados continues to attract low-end visitors with respect to spending power.
The image of the Barbados tourism product is best carried in the market by the West Coast. By every indicator in the industry, luxury tourism is the preferred driver for Barbados.
The perception of Barbados is suffering as the policymakers are more concerned about the number of arrivals than the spending power of the tourists.
It does not take a magician to work out that something is wrong when the foreign reserves at the Central Bank fell during the period that the Government was boasting of record tourist arrivals and the oil import bill was slashed dramatically. It, however, takes a trained mind to find out what may be wrong.
The boost to South Coast tourism has come mainly in the form of a programme called Air Bed and Breakfast or more simply, AirBNB. This explains some of the growth in tourist arrivals that, by the way, is a part of a regional phenomenon.
This brings me to an article in last Thursday’s DAILY NATION by Gercine Carter, which stated that “despite a record increase in visitors to Barbados, luxury hotels are not benefiting from the surge. Neither are the higher arrival numbers being reflected in increased visitor spend”.
Since the South Coast is benefiting more from the increased tourist arrivals, it appears that the sub-sector might have added to its employment levels during the first quarter. It is hoped that this is not the policy focus going forward as it brings several unintended consequences for the economy. More to come!
• Dr Clyde Mascoll is an economist and Opposition Barbados Labour Party advisor on the economy. Email: clyde_mascoll@hotmail.com