Barbados’ economy will grow by 1.9 per cent next year, but this positive picture is likely to be spoilt by the “high” fiscal deficit and widening “debt stock”.
That’s the prediction of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) in its latest economic analysis and forecast.
Last week, ECLAC published its 2016 review and 2017 economic outlook.
It said Barbados’ growth was heavily dependent on the resurgent tourism and construction sectors, but cautioned that there were weaknesses in other areas.
“For the second consecutive year, Barbados recorded positive economic growth in 2016, expected to be 1.4 per cent of GDP. This was driven by a solid performance in the tourism sector, which grew by three per cent in the first three quarters of 2016,” the agency said.
“Long-stay arrivals increased by 5.7 per cent, with growth up in the major source markets, which also helped fuel a recovery in construction sector activity. This progress was reflected in a lower unemployment rate of 10.2 per cent by September 2016.”
However, while noting that the current account deficit of the balance of payments also narrowed to 2.4 per cent of GDP, owing to increased exports and low imports, ECLAC said the fiscal deficit and debt remained areas of concern.
“The fiscal deficit remains high at an estimated 6.4 per cent of GDP. This, coupled with the high gross Government debt stock – 107.7 per cent of GDP – and increasing domestic interest payments, is a matter of ongoing concern for the Government of Barbados,” it added.
“Weak commodity prices continue to push consumer prices downward, with inflation of -1.2 per cent. Growth in 2017 is projected at 1.9 per cent, underpinned by continued growth in the tourism and construction sectors.”
Elaborating on concerns about the fiscal deficit, ECLAC observe that Government’s fiscal consolidation efforts “have been slow to yield the expected results”.
“The Central Bank of Barbados projects the fiscal deficit for fiscal year 2016/17 to be 6.1 per cent of GDP (down from original estimates of over eight per cent of GDP), which is a smaller deficit than the 7.5 per cent of GDP posted in fiscal year 2015/16, but still in excess of sustainable levels,” it said. (SC)
