Barbados
Figure 14
Barbados’ Economic Growth (2007-2014f)
Following a contraction in GDP of 0.4% and 0.6% during
the first and second quarters of 2013, the Central Bank
of Barbados has announced that a further contraction of
0.7% was experienced during the third quarter of the year.
The third quarter decline compares with a 0.1% expansion
recorded for the same period of 2012 and resulted from
contractions in both the tradable and non-tradable sectors
of 1.53% and 0.51% respectively. The most significant
contributor to the decline was the construction sector which
declined by 13.3% during the period - a nominal decline
of BBD7.3 million. The sugar industry component of the
agriculture sector was another significant contributor to the
contraction, registering a decline of 28% or BBD2.7 million.
According to the 2013 budget statement, a fiscal deficit of
7.9% of GDP was recorded in the last financial year 2012/13,
higher than the originally proposed deficit of 4.4% of GDP.
This shortfall resulted primarily from a decline in revenue
which fell short of the budgeted figure by almost 13% as
tax revenue fell. While a fiscal deficit of 5.6% of GDP was
budgeted for FY 2013/14, the Minister of Finance has noted
that revenue for the first three months of the new financial
year has continued to fall short of expectations and at that
pace the fiscal deficit for FY 2013/14 would be “somewhere
between 8 and 9%”.
Figure 13
Composition of the Barbados Economy
Government,
16.7
Tourism,
11.7
Manufacturing, 4.2
Agriculture, 4.0
Mining/
Quarrying, 0.4
Other Services,
20.3
Utilities, 4.1
Construction, 6.6
Logistics,
9.8
Distribution,
22.2
Source: Central Bank of Barbados
2
1.7
0.8
1
0
0.3
2007
2008
0.3
2009
-1
2010
2011
2012
2013
-0.8
2014f
-1.1
-2
-3
-4
-4.1
-5
Source: Central Bank of Barbados, International Monetary Fund
That said, the government intends to cut the deficit to a
target of 2.8% of GDP by 2014/2015. To meet this goal the
government has instituted measures including an immediate
freeze on all new hiring as well as filling of vacancies in the
central public service and across all statutory entities. In
July, the government announced that a fiscal adjustment of
BBD400 million would be required. There have been calls to
reduce the current rate of V.A.T. from 17.5% to the previous
level of 15% however this has been turned down by the
government, noting that the higher rate provided additional
revenue. The government has denied rumors that V.A.T.
would be increased to 21%.
Gross public sector debt at the end of the third quarter of 2013
stood at 105.8% of GDP which nets out to 62.2% of GDP.
According to the central bank, government interest payments
consumed 23.9% of revenue in FY2012/13, up from 20.7% in
FY2011/12. Foreign currency debt accounts for approximately
30% of Gross Public Sector Debt and while the servicing of
this debt has been a cause for concern in the international
community, the Governor of the Central Bank of Barbados
recently gave the assurance that the service costs on external
debt are “less than 10% for the foreseeable future”.
According to the Central Bank of Barbados, the current
account deficit stood at BBD579.1 million at the end of
the third quarter of 2013. This compares with a deficit of
BBD302.9 million for the same period of 2012. The largest
contributor to the decline in trade inflows was tourism, which
declined by BBD30.5 million or 2%. Trade in chemicals also
suffered, declining by BBD32 million or 31% while inflows
from sugar fell BBD21.5 million or 96%. Trade outflows were
relatively unchanged during the period. The capital account
stood at BBD104.2 million in September having suffered a
substantial decline as long-term private capital investment fell
by 69% from BBD473.1 million to BBD147.4 million.
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