The current performance of the Barbados economy is better than a year ago. The foreign exchange reserves have stabilised and there is no longer a threat to the value of the Barbados dollar. Tourist arrivals have held up in 2014, and tourist expenditures are estimated to have increased modestly. Airlift has increased for the coming winter tourist season and the tourism outlook has improved. We are witnessing the beginnings of a turnaround in hotel and villa construction, upgrades and refurbishment of tourism facilities, and other construction. The growth of tourism and construction and spinoffs to retail and business services should yield growth of about 1.8 percent in 2015.
Government has demonstrated commitment and fortitude in addressing the fiscal deficit. The adjustment was front-loaded, with the shedding of 10 percent of the public sector work force, the introduction of university fees, along with tax and expenditure measures. Progress has been monitored and adjustments have been made throughout the year. In his most recent statement on December 16 the Minister of Finance made public the budgetary limits set for state-owned enterprises, to achieve a fiscal target of no more than 7.2 percent, a saving of 5.3 percent, on the deficit for the last fiscal year. Fiscal consolidation, improved public sector productivity and the achievement of a low and sustainable fiscal deficit remain the objectives of Government's medium term fiscal adjustment programme.
Painful as the fiscal adjustment measures have been, they are essential, because they preserve our financial and economic autonomy. The ongoing measures of fiscal consolidation have cleared the decks for the private sector, and it is the bold and considered investment projects of private entrepreneurs and corporations, in tourism, green energy, international business, sports and culture, manufacturing, agriculture, information services, and every other sphere of economic activity, that will propel the renewed growth of the economy.
Informed opinion recognises that Barbados is among the most competitive economies in Latin America and the Caribbean. What makes us strong are our institutions, our infrastructure, our health and educational standards, the efficiency of our labour market and the development of our financial market, and our technological readiness. We have remained competitive in terms of the value proposition we offer tourists, in spite of the growth of competition in the Caribbean region and beyond. Lexus competes in the market with Mercedes and BMW; Toyota does not. Similarly, Barbados competes most effectively in the market with the Grenadines, the BVI, the Family Islands of the Bahamas, and other low volume, high value destinations. In those markets we offer a superior product, with sports, culture, communications services, shopping and entertainment options of an international caliber, to provide the visitor with a quality home-away-from-home experience. Because of that reputation for quality, variety and hospitality, Barbados may charge a premium on prices for the less affluent traveler as well.
We should be very confident of the future of our economy because we have the right economic strategy for our circumstances, and we are in charge of our destiny. Fiscal policy is being adjusted to balance inflows and outflows, and the incentive structure is being evaluated to ensure that the incentives for the foreign exchange sector are strengthened and the vulnerable in society are protected. Private initiative and investment continue to manifest across, all levels of income. There is a widespread appreciation of the need to raise labour productivity and the average quality of services, as the only sustainable avenue for raising domestic living standards. That appreciation will fuel an intensification of the work of the Productivity Council, NISE, the Office of Public Sector Reform and other productivity-enhancing initiatives of the private sector and Government in the months ahead. We have every reason to be confident of our energy, our capacity and our ability to achieve sustained growth of the Barbados economy.
Central Bank of Barbados
January 2, 2015