Use the latest browser recommended by Microsoft
Get speed, security and privacy with Microsoft Edge
The year 2020 was extraordinary, the result of the severity and persistence of the COVID-19 pandemic. The domestic economy experienced a double-digit contraction in output, reflecting an unprecedented disruption to tourism activity, weak private sector investment and reduced consumer
consumer spending. Curfews and business closures aggravated the economic loss during the second quarter and limited international travel prevented a rapid recovery in the latter part of the year. Unemployment was elevated and government revenues fell sharply, forcing Government to alter its fiscal stance by shifting its primary balance target for FY 2020/21 from a surplus of 6 percent to a deficit of 1 percent of GDP. However, budgetary support from international financial institutions enabled the gross international reserves to rise to $2.7 billion, or approximately 40 weeks of imports.
The COVID-19 pandemic is expected to continue to present challenges in the near term. Our links to the global economy means that the timing and size of the economic recovery will depend on the success of international efforts to accelerate vaccinations to contain the spread of the virus, thus alleviating concerns regarding international travel. Public adherence to the preventative directives is crucial, making the path to economic recovery much more attainable. The financing and external reserve buffers accumulated during 2020 are intended to help the country navigate these challenges.
In support of Government’s policy response, the Bank eased its monetary policy stance by reducing the discount rate on temporary advances to financial institutions, lowering the mandatory Government securities reserves ratio for banks and eliminating that ratio for non-bank deposit taking financial institutions.
The Bank also updated its regulatory guidance on temporary arrangements to its licensees which granted moratoria on loans to their customers. These measures were intended to assist financial institutions facing an expected deterioration in credit quality of businesses and households to service existing and new loans. Non-performing loans did increase modestly and banks raised their provisions; nevertheless, the financial system remained stable in the recessionary environment.
The deepening of the economic crisis could adversely impact financial institutions, but high excess bank liquidity and the well-capitalised banks should serve to cushion the effects of the economic fallout. Indeed, system-wide stress tests conducted by the Bank indicated that the domestic financial system has the ability to withstand the magnitude of the pandemic shock, with appropriate policy adjustments to reduce the negative spillover effects.
The Bank registered a net income of $24 million, despite the low interest rate environment for international reserves investments. This performance reflected improved foreign exchange earnings from the larger holdings of reserves, and gains from lower expenditures occasioned by the deferral of some operations as a result of COVID-19. Preliminary work started on the recapitalisation plan for the Bank during 2020.
The Bank continued to deliver its services, largely from remote locations. Our investment in technology allowed us to adapt almost seamlessly our engagement with the Bank’s stakeholders. Internally, we established a COVID-19 Task Force that developed safety and security protocols for staff, reflecting a proactive and caring approach to the management of the emerging risks. The Bank’s Security, Maintenance, and Currency Sections were our essential frontline staff, ensuring that the building was secure and healthy, and that the wider public had access to much-needed cash.
Our public outreach was enhanced with the design of new programmes to ensure that our staff and various publics remained connected. Our refocused Caribbean Economic Forum was well received by the public. I am especially proud of the fitting tribute we paid to the essential workers of Barbados, including our own staff, in the form of the limited-edition glow-in-the-dark coin.
The Bank remained focused on its core objectives and, through its production of technical economic research and policy analyses on critical economic issues, economic press briefings, digital seminars, speeches and publications, ensured that the public was kept abreast of economic and financial sector developments. The Bank remained actively engaged in the IMF reviews and staff visits, as well as national subcommittees working to strengthen the analysis of debt and the fiscal statistics.
Considerable attention was paid to the drafting of the new Central Bank of Barbados Act, which was passed into law on December 14, 2020, and to the new National Payments System Bill which will come on-stream this year. Work continued on the upgrade of the Automated Clearing House (ACH) to facilitate improved efficiency in domestic payments.
On behalf of the Board of Directors, I would like to express sincere thanks and appreciation to the management and staff for their dedication and commitment during the year. Despite the challenges presented by the new environment, staff continued to advance the Bank’s strategic initiatives. This commitment will be needed in the new year, as the Bank continues to monitor and assess economic developments, enhance its internal governance and risk management, mitigate emerging cyber-security risks and accelerate its digital transformation initiative, including the establishment of an enterprise-wide document, record and content management system.
The Bank’s strategic programme for the triennium 2021-2023 places increased focus on the Bank’s relations with its stakeholders and increased attention will be placed on ensuring that the Bank’s culture supports better performance management and measurement, and improved organisational efficiency. I am confident that the Bank, with the continued support and cooperation of management and staff, will continue to Rise to the Challenge.