Barbados’ economy recorded its fifth consecutive quarter of growth and is expected to expand another 10% this year as visitor arrivals and economic activity are boosted by the return of the Crop-Over Festival.
However, as he noted that the Central Bank of Barbados had slightly lowered growth forecasts for the rest of the year, Governor Cleviston Haynes warned that several significant global risks and the continued rise in commodity prices were challenging. causes short-term growth prospects.
Delivering his economic review for the January-June period and outlook for the rest of the year on Wednesday, Haynes said the economy recorded its fifth straight quarter of growth between April and June, which helped the economy expanded by 10.5% for the first six months of this year, again propelled by the tourism industry.
“The recovery mainly reflects the rebound in tourism activity and there were also modest gains in manufacturing exports and domestic spending,” he said.
During the six-month period, Barbados welcomed a total of 207,835 stay-over visitors, which was supported by the relaxation of COVID-19 protocols in key source markets and pent-up travel demand.
“Airlift capacity for the April to June period more than doubled from 2021, but airfares were significantly above pre-COVID levels,” Haynes reported, adding that the impact on the economy of the crop festival – which returned after a two-year hiatus due to COVID-19 and will peak on August 1 – would depend on the number of visitors coming to the island this summer.
“Even regardless of an influx of individuals, Crop itself generates significant economic activity. I believe that the activities we have carried out over the past few weeks demonstrate that there is a positive economic impact from the Crop festivities, and as a result, I anticipate this will add to the overall growth momentum of the economy for the remainder of the year,” Haynes said.
He said the continued strength of Barbados’ recovery remained dependent on a sustained revival of the tourism sector and the accelerated implementation of investment projects.
“Forward tourism bookings for the rest of the year are encouraging as travelers reschedule trips postponed by COVID-19. The scheduled opening of the Wyndham Sam Lords property is expected to boost demand towards the end of the year. However, significant downside risks remain,” Haynes said.
The Central Bank Governor identified global price pressures, the impact of monetary policy changes in advanced economies, lower travel demand, exchange rate fluctuations in Barbados’ main source markets and vulnerability to climate change as some of the areas that could impact the island’s growth prospects. .
“Under these circumstances, with new investment projects coming on stream at a slower pace than expected and construction costs rising, the Central Bank has lowered its growth forecast slightly, to a range of 9 to 10%, with the possibility of further growth. outcome if tourism is more supportive than currently expected,” he said, noting that “we will lean to the higher side” of the growth forecast.
Haynes added in his outlook that “the domestic macroeconomic environment will continue to be affected by global instability as soaring global prices have intensified the near-term growth challenges associated with the pandemic.”
“The policy response of rising interest rates in industrialized economies has raised fears of another recession and the International Monetary Fund has tempered its global growth forecast in light of this uncertainty,” he added.
Haynes said given the island’s reliance on imports, high energy and food costs are expected to continue to impact local prices.
“Rising costs can also have a significant impact on businesses. For example, construction projects may be delayed, particularly if access conditions or the cost of financing change significantly. Price-sensitive sectors such as tourism and manufacturing, if faced with higher input costs and lower demand for their products for extended periods, may attempt to reduce operating costs by laying off staff. staff,” he said.
In the first half of the year, the unemployment rate fell to 9% for the first quarter of this year, from 17.2% a year earlier.
Haynes said employment gains in the private sector were broad-based, led by tourism, wholesale and retail trade, transport and communications and general services.
International reserves were recorded at $3 billion for the period, representing some 33.7 weeks of imports.
Government revenue increased by some $128.2 million to $771.8 million, while current expenditure increased by $49.6 million to $607.6 million from the same period last year. Gross public sector debt was 129% of gross domestic product (GDP) or $13.6 billion.
“The spiraling domestic prices as well as the recovery in tourism activity boosted government revenue in the first quarter of the fiscal year and contributed to a significant improvement in the primary surplus,” Haynes said.
“The fiscal performance reflects the government’s continued commitment to strengthening public finances and puts the debt-to-GDP ratio on a sustainable downward path.”
Haynes said he did not expect recent measures announced by Prime Minister Mia Mottley to ease pressure on consumers to have a significant impact on the government’s fiscal position, although the administration is waiving revenue estimated at $18 million.
The measures included a reduction in value added tax (VAT) on electricity for the first 250 kWh from 17.5 to 7.5%, price reductions on 45 essential items and an expansion of the basket of essential foods that do not attract TVA
“While the basket is very targeted to ensure that those members of society who need it most can benefit from the aid, I think there is a general increase in prices which will help to compensate in part,” said explained Haynes.
At the same time, he said the government will have to “review its own spending plans to ensure it maintains a strong fiscal program as we move forward.”
Total agricultural production for the review period increased by 3.7% to record a contribution of $52.7 million to the economy in the first six months. Non-sugar agriculture has expanded, in part due to increased production of chicken, food crops, other meats, eggs, and fish catches.
Manufacturing output increased by 3.3%, contributing $247.3 million to the economy during the review period. Meanwhile, preliminary estimates indicated that the service sector grew by 2.7% in the first half of the year.