The Central Bank on Tuesday released its second-quarter report for the year, predicting growth in 2014 of 0.3 per cent based on expected performances in the foreign exchange earning sectors. The bank also stated that the economy is expected to pick up by 1.2 per cent in 2015, and 2.5 per cent in 2016.
“We at least believe at best a flat performance, but the realistic scenario would be that we expect a drop off at the end of the year,” said Jeremy Stephen, President of the Barbados Economic Society (BES).
“I stick by the prediction that growth would be at least three years off… around 2017 you would see significant recovery.”
Stephen, an economic consultant and part-time lecturer at the University of the West Indies, said his disagreement with the Central Bank’s forecast is based on the quarterly report pointing to government’s continued heavy borrowing from the commercial banking sector.
“So the challenges we expect would remain going forward, particularly in arresting the fiscal deficit, using fiscal consolidation as a major strategy,” he said.
The Central Bank had stated that as of March this year, fiscal adjustment measures started last August, appeared to be restoring a balance of inflows and outflows of foreign exchange.
Those adjustments are part of an 18-month programme.
But Stephen cautioned, “We’re still in the middle of the 18-month adjustment programme…so we still have six months to go to see whether the fiscal consolidation would have been successful, but with where we are going right now it is very hard to say that it’s been significantly successful, I would say that at best it has been tepid”.
Ryan Straughn, immediate BES past president said, “I don’t really see where this growth is going to come from”.
“The government spent more in the period of September 2013 to March this year, so one would have to see some more significant cuts coming on stream this year if they are to meet any of the targets. They are looking to raise an additional $300 million (One BDS dollar = 50 US cents) in revenue this year, and I find that hard to achieve and obtain that growth which is being projected to the end of the year as well.”
He said more government fiscal adjustment measures are going to be necessary, “because the deficit was meant to be around eight per cent the end of March, 2014, but it turned out to be nearly 12 per cent.
“Therefore one would have to see a considerable adjustment, certainly between now and the end of March next year, if we are going to achieve any of the targets that would have been highlighted in the budget of last year.”
Although Barbados’ budget statement is presented in August, the financial year begins March 31 of the following year, hence the 2014-2015 fiscal period ends in March 2015.