||Central Bank Of Barbados
In 2019, Government must build on the progress in restoring macroeconomic stability, and engendering confidence. Efficient and timely execution of the reforms identified in the adjustment programme, related to tax policy, revenue administration, state-owned enterprises (SOE) reforms and business facilitation together with the achievement of the IMF’s performance targets will be crucial in helping the economy to return to a sustainable growth path.
Over the past decade, the average rate of growth was -0.7%. Revitalising growth is therefore critical but the forecast for 2019 is for growth to be flat. Tourism is expected to perform favourably due to an anticipated expansion of airlift, special events like the English cricket tour and an increase in ships docking at the port. This activity will be supported by the thrust towards Barbados emerging as a hub for medical education. The need to sustain the fiscal consolidation effort could continue to dampen economic activity. However, this trend can be reversed through higher levels of private sector investment. Several projects in the tourism, healthcare and distribution sectors have been identified for start-up in 2019. The actual commencement date of these projects will influence the degree of expansion in real economic activity.
Significant downside risks remain. In particular, the forecast for global growth, including our major source markets, has been revised downwards by the IMF from 3.7% to 3.5%. The US economy is forecasted to grow by 2.6% this year but the uncertainty related to trade tensions lingers. The latest Brexit developments can also impact economic activity in the UK, with potential effects on the pound sterling.
Geopolitical factors could alter the outlook for international oil prices, influencing economic activity and an otherwise benign inflation environment.
The revenue measures announced in the latter part of 2018 will have a full year impact in FY2019/20 as Government strives to achieve its targeted primary surplus of 6% of GDP. However, Government must continue to manage its expenditure to avoid any shortfalls in its targeted goals.
The external debt suspension has helped to shore up reserves and the completion of the restructuring remains important to the overall stabilisation effort. Placing the debt on a downward trajectory and creating fiscal space will allow for the gradual reduction in outstanding arrears to the private sector and strengthen the medium term growth potential. These developments should contribute to a further improvement in credit ratings.
Effective programme implementation will facilitate additional access to funds from the multilateral agencies. These resources should enable the reserve cover to continue to grow in 2019.
The road ahead remains challenging, but the commitment of the Government and all Barbadians to continue the critical structural reforms will position the economy to overcome these hurdles and strengthen economic sustainability.