||Central Bank Of Barbados
The outlook for the Barbados economy has become more favourable over the past 12 months. The public finances have improved, the international reserves have recovered and the financing pressures created by high indebtedness have started to ease. Indications are that investor confidence is returning, but as expected, economic activity for 2019 has been sluggish. Growth from the tourism sector has buoyed economic activity, but faster project implementation is required to push growth above the forecasted range of 0% to 0.25%. With the strengthening of the macroeconomic environment, an anticipated further pick-up in tourism and an acceleration of investments, the current forecast for 2020 is in the range of 0.75% and 1.25%.
The success so far in repairing macroeconomic imbalances has been based on unwavering fiscal discipline. Maintaining this commitment remains paramount as Government seeks to reassure investors of its commitment to a sustained adjustment effort. This will allow further access to IMF resources and help to catalyse other funding to enhance the reserve buffer. Conclusion of the external debt negotiations will further strengthen the macroeconomic environment, by reducing uncertainty, solidifying the downward trajectory for debt and enabling Barbados to work with investors to capitalise on emerging opportunities.
We remain conscious of the downside risks, both domestic and external, that need to be managed. For example, the strength of the economic recovery will be influenced by our ability to implement large-scale commercial projects that can accelerate growth. We need to pursue legislative and structural reforms geared towards restoring the competitive business environment, reducing delays and creating an enabling environment that is conducive to growth in the medium to long-run. In this regard, improving our ease of doing business ranking is critical, as we seek to promote diversification and increase productivity and efficiency.
These developments should supplement the potential gains from recent initiatives to make Barbados more tax competitive through the lowering of corporate rates and the relaxation of foreign exchange controls. The new regime for foreign currency accounts took effect from August 2, 2019 and is designed to encourage persons with foreign exchange to bring their funds home. Increased liberalisation should improve competitiveness by reducing the time required for the execution of transactions.
Global growth prospects have softened due to several factors including U.S.-China trade tensions, the deadlock of the Brexit negotiations and uncertainty linked to geopolitical tensions in the Gulf. The economy remains sensitive to volatility in international oil prices, but we will also monitor the price of grains, as delayed planting in the American Midwest due to wet conditions has resulted in the rising price of corn and soybean and this could have adverse effects on domestic prices.
Despite these risks, the Bank believes that the economy is moving in the right direction. Adjustment is seldom easy but the effort is required to safeguard our standard of living. Let us continue to work together to achieve our mission.