Jul 2014 Financial News

Barbados makes headway from adjustment measures

Jul 16, 2014

THE Central Bank of Barbados is reporting some progress from the fiscal adjustment measures.

The bank’s Governor, Dr. Delisle Worrell, said yesterday that the adjustment measures taken by Government between August 2013 and March this year appear to have begun to restore the balance of inflows and outflows of foreign exchange.

In revealing this, the Governor also said that the economy remained flat for the review period.

Dr. Worrell was at the time reviewing the economy’s performance for the first half of the year 2014.

Worrell highlighted, “The foreign exchange reserve trends for the first six months of the year reverted to the pattern of the years from 2009 and 2012.”

According to him, “Reserves declined by $51 million, compared to a fall of $119 million on average for those years. At the end of June, the stock of reserves stood at $1 093 million, representing 15.1 weeks of import reserve cover.”

He said that output in the all important tourism industry is estimated to have increased marginally for the first half of the year. “Arrivals from the UK were up 8.2 per cent, but there was a fall-off from the US, Canada and the Caribbean. Average length of stay increased by 1.5 per cent, and average expenditure per visitor is estimated to have risen by one per cent, making this the third consecutive year that average expenditure has increased. Average spending has now recovered to the levels of 2008.”

The fiscal adjustment measures have dampened the demand for imports, and total imports fell by 1.4 per cent for the first six months of 2014.

The fiscal consolidation programme yielded an estimated $51 million in the first quarter of the fiscal year. The consolidation tax brought in $9 million, and the tax on commercial bank assets, $4 million. Grants to public institutions were reduced by $9 million and outlays on goods & services declined by $9 million. Job cuts are estimated to have reduced the Government wage bill by $20 million.

The overall deficit for the first quarter was $214 million; $5 million lower than for the same period last year. The primary deficit for the quarter improved by $30 million, to $21 million.”

However, the review indicated output for the economy as a whole remained flat despite the improved tourism performance. There was no increase in value added in international business and financial services, and other exports of goods and services rose only marginally. Fiscal consolidation to restore the external balance exerted an unavoidable drag on the output of the non-tradable sector.

Unemployment has been on the rise because of the Government’s on-going retrenchment programme. The average rate of unemployment over the four quarters ending March was 11.7 per cent, slightly higher than for the same period a year earlier. The twelve-month moving average rate of inflation fell from 2.6 per cent a year ago to 1.7 per cent, as at end-April 2014.”

Source:
By Nadia Brancker
Barbados Advocate
Wednesday July 16, 2014

http://www.barbadosadvocate.com/newsitem.asp?more=business&NewsID=37570