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April 18, 2010

The island’s lead economist noted that the island was no closer to a revival of demand in tourism, international business and financial services

Economists have predicted that economic recovery for the Barbados would lag behind the return to growth of its developed country trading partners and this reality is presenting a sobering problem for montary authorities on the island.

The review of Barbados’s economic performance for the first three months of this year released yesterday by Governor of the  Central Bank of Barbados Dr DeLisle Worrell has revealed that the island is yet to return to positive growth as its gross domestic product (GDP) contracted by less than 1% over the period. The last time Barbados witnessed positive GDP growth was in September 2008 when the economy grew by just over 1%.

In outlining Barbados’s economic picture, the island’s lead economist noted that the island was no closer to a revival of demand in tourism, international business and financial services, and of manufacturing and agricultural exports, despite the economic recovery now underway in Barbados’ international source markets and trading partners.

“The industrial countries from which we derive the demand for our exports and services are now reporting real growth, and the US has at last recorded a month of net employment gain in March. However, the spillover to increased demand for Barbados’ output is not yet evident. In the meanwhile, financial constraints on government and business remain very tight,” reflected the central bank head.

“Until the demand for Barbados’ exports and services picks up once more, there is no good alternative to the current strategy of modest external borrowing, judicious help for the foreign exchange sectors and continuing measures to protect the most vulnerable,” he added.

In November 2009,  University of the West Indies economics lecturer and former Central Bank of Barbados economist Dr Winston Moore predicted that Barbados’s exit from the recession would be very slow and the economy would show flat growth over 2010 based on the lag effect experienced by small island states in the wake of the economic recovery by the developed countries. At that time, he predicted that Barbados would not return to growth until 2011, which he forecast would be around 2%.

Barbados can still boast $1.3 billion in net international reserves, equalling roughly five months worth of import cover according to Dr Worrell. However, he noted that this tourism high season failed to supply the customary “first quarter surge” of foreign exchange for government coffers. The economist attributed this to the heavy discounting offered by tourism accommodations and attractions on the island meant to woo more visitors to the island. While the marketing ploy managed to drive up demand by increasing long-stay visitor arrivals by 2% for January and February in contrast to the same period for 2009, it also led to lower average spend by the visitors. As a result, noted Dr Worrell, tourism receipts were insufficient to provide the anticipated foreign exchange boost.

In fact, the central bank governor noted that of the foreign exchange earning sectors, only garment and chemical manufacturing showed any significant growth – improving by 122.7% and 110% respectively. The sugar, beverages and tobacco and wooden furniture industries marked double digit declines; while none of the remaining traded sectors exhibited more than a 2% growth.

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