Barbados’ economy has grown for the fifth consecutive quarter, but the current extremely challenging global economic environment has prompted the Central Bank to slightly lower its growth forecast for the rest of the year.
Central Bank Governor Cleviston Haynes gave this update today as the bank’s review of the country’s economic performance between January and June was released at the Frank Collymore Hall.
“The economy registered its fifth consecutive quarter of growth between April and June. The expansion, though vibrant, was weaker than in the first quarter, but growth for the first half of the year remained in double digits,” he reported.
“The recovery is mainly reflective of the rebound in tourism activity and there were also modest gains in manufacturing exports and domestic spending.”
He added: “The external economic environment remains extremely challenging. The impetus for a sustained economic recovery persisted into the second quarter of the year as a slightly better than forecasted rebound in tourism propelled the economy by an estimated 10.5 per cent over the first half of 2022.”
The economist noted that while tourism related activity had not yet returned to pre-pandemic levels, “the easing of the protocols opened the way for increased domestic spending and enabled the labour market to show signs of a return to near normality”.
The downside, however, was that “inflationary pressures originating abroad were felt in the domestic market, raising the risk of a dampening of growth prospects”.
“The Russia-Ukraine conflict continued to compound an already difficult environment for the cost and shipment of goods and commodities arising from the COVID-19 induced supply chain bottlenecks. Sharp increases in imported food and energy prices had a significant pass through effect on domestic prices, prompting interventions by Government to soothe the burden on consumers,” Haynes said.
“The spike in import prices, particularly for oil, continued into the second quarter. With import volumes also increasing as economic activity strengthened, spending on imports for the first six months of the year surged to historic levels.
“Receipts from the tourism and international business sectors and the proceeds from the final drawdown of funds under the Extended Fund Facility arrangement with the [International Monetary Fund] dampened the adverse impact on the international reserves,” he added.
The Governor also said that with rising interest rates continuing to have a negative effect on the valuation of the investment portfolio, the reserves suffered a small loss in the quarter, but reserved “continued to exceed $3 billion”.
The Governor also said regarding Government’s fiscal situation that “the spiral in domestic prices, together with the revival of tourism activity, boosted Government’s revenues during the first quarter of the fiscal year and contributed to a significant improvement in the primary surplus”.
“This fiscal performance reflects Government’s continued commitment to strengthen the public finances and place the debt to GDP ratio on a sustainable downward trajectory. The stock of debt rose modestly during the quarter, but the debt ratio declined further as the recovery in the economy took root,” he said.
Haynes said in his outlook that the domestic macroeconomic environment “will continue to be affected by the global instability as the surge in global prices has intensified short term growth challenges associated with the pandemic”.
“With new investment projects coming on stream at a slower pace than anticipated and with construction costs rising, the bank has lowered its growth forecast slightly, within the range of nine to ten per cent, with the possibility of a stronger outturn if tourism is more favourable than currently forecast,” he said. (SC)