Barbados will continue to show weak economic growth this year as long as the global economic recovery is lacklustre.
The disappointing prediction has come from the International Monetary Fund (IMF) as it released its Article IV consultation on Barbados based on discussions held last October.
However, the IMF team reported that Government had indicated it stood “ready to take additional actions if risks were to worsen in the near term”.
The institution warned that while tourism arrivals were picking up, the rest of the economy was not showing any improvement.
“Real GDP growth is expected to be just over one per cent, building on an anticipated further rebound in tourism. Higher international oil and food prices are expected to push inflation to slightly above seven per cent . . . with some easing in 2012,” the IMF team led by economist Therese Turner Jones said.
The IMF analysts did not offer much good news for Government regarding the country’s main foreign exchange earner.
“The medium term economic prospects are uncertain with risks tilted to the downside. The current tepid and uncertain pace of the global recovery is likely to weigh on growth in Barbados.
“Given the weak labour market conditions in [Britain] and United States, Barbados’ major source markets, sustained increases in tourist arrivals appear challenging. Consequently, the output gap will only narrow in the medium term,” the IMF told Government.
Last week in his report on the Barbados economy for 2011, Central Bank Governor Dr DeLisle Worrell said one per cent growth or less was likely this year.
He also urged Barbadians to batten down and rely on the country’s slow but steady economic activity until the international financial storm came to an end.
But the IMF said Barbados’ high level of public debt would severely constrain the Freundel Stuart administration from spending in areas such as capital projects that might boost growth prospects.
The IMF argued that “a further slowdown in advanced economies will dampen the recovery and put additional pressures on the macroeconomic situation”.
The IMF added: “Barbados’ reserves are projected to fall continuously in nominal terms due to weak external demand for tourism. Reserve coverage above three months of imports would be sustained over the medium term provided that strong net foreign direct investment inflows are observed with the revival in the main trading partners and tourism source markets.”
