Barbados predicts modest economic growth for 2013

BRIDGETOWN—Barbados is forecasting less than one per cent real economic growth for 2013 up from “no real growth” last year. The Central Bank of Barbados said that the 0.7 per cent forecast for this year is based on the most recent forecast by the International Monetary Fund (IMF) of average growth of 1.7 per cent for the United States, the United Kingdom and Canada, the island’s major trading partners.

In a review of the Barbados economic performance for 2012 and prospects for 2013, the Central Bank said that the projections were also based on an improvement in consumer expenditure in these markets of 1.2 per cent. “In addition, private capital inflows of Bds$600 million (one Barbados dollar = US$0.50 cents) are anticipated for activity in the tourism and construction sectors. No significant gain in employment is expected.

“Based on current trends in international commodity prices for food, and the IMF’s projection for fuel, domestic inflation could fall to the region of five per cent for 2013,” the Central Bank said. It said Barbados’ foreign exchange reserves increased during the year to Bds$1,467 million, and the import cover at the end-December stood at 18 weeks, even though there was no real growth in the economy in 2012.

Output and foreign exchange from tourism contracted, with a 6.2 per cent decline in long-stay arrivals and an increase of only 4.3 per cent in the average length of stay. However, import expenditure was contained, and the gap between import payments and foreign earnings was smaller than for 2011.

The Central Bank said foreign exchange inflows on the capital account held up, thanks largely to the receipt of Bds$167 million from the sale of Barbadian shares in the former Barbados National Bank.

“The flat growth performance resulted from declines in tourism, other traded services and manufacturing,” the Central Bank said, noting that output in the non-traded sectors grew by only one per cent because of fiscal spending limits and the reduction in the traded sectors. It said that several tourism related projects were ongoing, but foreign investment in real estate projects was down about 16 per cent.

The fiscal deficit for the April-December period is estimated at 6.4 per cent of gross domestic product (GDP), compared with 5.2 per cent in the same period of 2011. Revenue from personal taxes was down ten per cent and value added tax (VAT) receipts fell two per cent, but there was a nine per cent increase in property taxes.

Caribbean360