It said that the improved economic situation was due to improvements in the tourism, construction, business and other sectors where growth was an average three per cent.
The Central Bank of Barbados (CBB) also noted that the average unemployment rate fell to 10.2 per cent for the nine months ending June and that inflation remained in negative territory, with the price index declining by 1.2 per cent.
It said Barbados ranks at number seven in the Americas in the competitiveness of the tourism sector with the United States, Canada, Brazil, Mexico, Panama, and Costa Rica ahead of the island.
“A strength of the tourism industry is the fact that Barbados does not have an overreliance on any one market. Long stay arrivals increased by 5.7 per cent, with arrivals from the US up 11 per cent and the UK up three per cent,” the CBB added.
It said the economic foundations of Barbados’ international business and financial services sector remain strong, but the sector faces a challenge because of the sentiment against globalization in advanced economies.
Data up to July indicates that the number of licenses granted to International Business Companies (IBC) declined by 7.5 per cent. In addition, a total of BDS$67 billion (One Barbados dollar =US$0.50 cents) in assets were held by international banks in June 2016, representing a 16 per cent decrease over a 12-month period.
“Maintaining the value of our currency hinges on crafting fiscal policies that aid in dampening the demand for foreign currency. Government’s fiscal consolidation has assisted in the maintenance of a level of reserves that are above the 12 week benchmark.”
The CBB said that the stock of foreign reserves at end-September stood at BDS$900 million or 14 weeks of import cover and in an effort to augment this stock of foreign reserves, fiscal policy was tightened in August, by means of a combination of additional revenue measures and further cuts in expenditure
There has been a significant improvement in the current account of the balance of payments, but the financial account inflows have been very weak. The current account deficit was lower by 3.6 percentage points of GDP, almost entirely because of tourism. Fuel imports were down by 1.9 percentage points of GDP, with a fall in both prices and the amount imported.
The CBB noted that the fiscal deficit for the April to September period is estimated to be BDS$145 million on the current account and that accrued tax revenues are anticipated to increase by BDS$13 million, with corporate taxes, property taxes, and excises increasing by six million, BDS$14 million and BDS$10 million respectively.
The Central Bank is forecasting that economic growth of 1.4 per cent for 2016, indicating that growth for the next five years is expected to be in the region of two per cent per year, “driven by our competitive, diversified, and highly regarded tourism sector”.
The CBB said an 11 per cent increase in airline capacity is expected from the US and Canada for the coming tourist season and that a pickup in construction activity is also anticipated, much of it tourism-related.
“The combined effect of the August fiscal measures and revenues from the sale of the Barbados National Oil Terminal Ltd. is expected to reduce the Government’s deficit to the end of the fiscal year slightly above four per cent percent of GDP.
“A continuation of the process of fiscal consolidation should reduce the deficit below the rate of GDP growth in 2017. In subsequent years the ratio should decline, as Government updates the medium term fiscal adjustment strategy.”
The CBB said that Barbados remains confident of the prospects of its international business and financial services sector, and officials of Government and Central Bank are actively engaged with international institutions and companies to find ways of resolving the current challenges.
“The prospects for value-added rum and other high quality exports and services are encouraging. The growth of the renewable energy sector has great promise for the medium term. Significant improvements in labour productivity, including the more productive use of new technology, could substantially better the expected growth rates generated by the foreign exchange sectors,” the CBB added.
- Countries: Barbados