CARIBBEAN ECONOMIST Marla Dukharan is predicting that the Barbados economy is headed for a contraction this year.
As teams from Government and the International Monetary (IMF) yesterday started discussions aimed at hammering out an agreement for assistance from the fund, the Inter-American Development Bank (IDB) also said it was “important for the Government to increase fiscal consolidation measures, foster greater competitiveness and diversification, and improve the business climate”.
Dukharan gave her assessment in her monthly Caribbean Economic Report for July, while the IDB’s view came in its latest Caribbean Region Quarterly Bulletin.
Yesterday, a Government delegation, including representatives from the Ministry of Finance and Central Bank of Barbados, met with the IMF delegation led by IMF mission chief for Barbados, Dr Bert van Selm.
In a Barbados Government Information Service report ahead of the discussions, Minister in the Ministry of Finance Ryan Straughn said the early discussions would focus on Barbados’ current fiscal position before going into detail on specific sectors.
In her report, Dukharan calculated that based on the $1.2 billion, three-year fiscal adjustment announced in the recent Mini-Budget, and the IMF’s 0.3 fiscal multiplier in its latest Barbados Article IV report, the adjustment “would result in an economic contraction of about 6.6 per cent” over the three years.
IMF forecast
In terms of the impact this year, she added: “IMF forecast growth at 0.5 per cent in 2018, 0.8 per cent in 2019 and one per cent by 2023 before the current adjustment programme was announced. We are working with projections for a contraction of 1.5 per cent this year and next, so far.”
The IDB, whose president Luis Alberto Moreno met with Prime Minister and Minister of Finance Mia Mottley here recently, said: “Setting and committing to a structural reform programme that tackles consecutive fiscal imbalances and boosts investor confidence and competitiveness will be key to enhance economic growth in the medium and long term.”
The bank’s Caribbean economic team said while the new budget measures were “expected to further reduce the fiscal deficit”, there would need to be “greater focus on curbing expenditures, with an emphasis on transfers and reforms to state-owned enterprises going forward”.
With the negotiations with the IMF scheduled to conclude next week Thursday, Straughn said in addition to fiscal matters, the talks with the fund would focus on Barbados’ debt restructuring and measures to grow the economy.
He anticipated that by the time this latest round of talks with the IMF concluded, Barbados would, at minimum, have “a working agreement”. Once van Selm and his team returned to Washington, the hope was that there would be an IMF board agreement “as early as possible”.
“It is certainly our intention to make sure that the IMF team has all of the data and information needed to be able to come to a conclusion as to how and what they can support,” Straughn said. (SC)
