Governor of the Central Bank of Barbados, Cleviston Haynes says the outlook for the economy has become more favourable as macroeconomic indicators continue to improve in line with the Barbados Economic Recovery and Transformation (BERT) programme.
In delivering the review of the economy for January-March 2019, on Thursday, Haynes said based on provisional data the government should meet its targets for end March, as agreed with the International Monetary Fund (IMF).
The Governor also called on residents to exercise further patience given the light at the end of tunnel.
“It is not something you can do overnight. So we ask persons to be patient. I think the progress we have made so far is very encouraging. We have taken some very difficult decisions. We have taken them in a very short period of time and we have made some progress, but we have to continue to work to meet the objectives – get the stabilization complete. This year is going to be very important in terms of how we advance,” said Haynes.
He however warned that significant downside risks remain and these need to be monitored and managed to prevent “policy slippage, including the potential for delays of large commercial projects, negative spill-overs resulting from international economic developments and the on-going global trade tensions.”
According to Haynes, the IMF has already lowered its forecast for global growth from 3.5% to 3.3% over the last 6 months.
He said that while the outlook for international food prices remains muted due to geopolitical factors and uncertainty surrounding international oil prices this year, the Bank is encouraged by the start-up of some new private sector investment projects.
He said these projects will will complement tourism activity, and the impact of the new thrust in medical education services.
“Indeed, the rate of economic recovery will hinge on the speed of implementation of new investments and on the pace of economic diversification which is needed to supplement traditional foreign exchange earnings.”
Some of the new projects such as the Sagicor Retirement Village, are expected to boost growth in the second half of the year and the Bank now estimates that overall growth will range between 0% to 0.25% for 2019.
The Governor said that programme targets will continue to focus on building reserves, strengthening the public finances and gradually reducing debt.
Concerning the Gross Domestic Product (GDP), the Bank says that achieving the primary surplus of 6% remains pivotal to economic developments.
“One has to continue to monitor very closely, and outcomes will determine if any additional adjustments are required. But at this point we believe the six per cent is achievable.”
The Governor was unable to say how soon negotiations for the external debt restructuring would be completed, but said “we think it is important to bring a resolution to that as soon as possible to remove the uncertainty and create further confidence in the system”.
He noted that this strong targeted fiscal performance, together with the combined effects of the domestic and external debt restructuring once concluded, will enable government to reduce arrears, lower the
debt and facilitate further improvements in the credit ratings,” the report stated.
Another area of focus will be the continued elimination of arrears related to tax refunds and supplier payables is essential for improving private sector cash flows and further restoring confidence.
“Meeting these targets will be influenced by the effectiveness of Government’s expenditure restraint and by the progress in strengthening revenue collection”
These include the 2018 revenue measures which will have a full year impact in the financial year 2019/20 and by the recently announced measures in the March 2019 budgetary statement.
“It is clear that the building blocks to recovery are in place. Nonetheless, the road ahead remains challenging. What is required now is the continued commitment and engagement of all stakeholders to ensure that we achieve durable growth for all.”