BRIDGETOWN, Barbados – Governor of the Central Bank of Barbados (CBB), Dr. Kevin Greenidge Tuesday said the local economy is projected to remain on its growth trajectory throughout 2024, hinged on the continued expansion of tourism as well as private and public investments.
Governor of the Central Bank of Barbados, Dr. Kevin Greenidge at news conference on Tuesday reviewing performance of economy during the first three months of 2024 (CMC Photo)“The economy is now larger in both real and nominal terms than before the occurrence of the COVID-19 pandemic. Further growth of around 3.9 per cent is projected for 2024, contingent on additional expansion in arrivals and continued investment in the economy,” Greenidge told a news conference as the CBB reviewed the performance of the economy in the first three months of this year.
The CBB said that the economy had showed strong growth during the first quarter of 2024, driven by robust tourism activity and ongoing infrastructure investments.
It said tourism activity surged in the first three months of 2024, propelling a 9.5 percent expansion in the traded sector. Conversely, the agricultural sector experienced a decline, with output falling by 6.8 per cent year-on-year due to unfavourable weather conditions.
But the CBB said that the robust growth in the traded sector stimulated the non-traded sectors, notably enhancing output in business and other services.
It said construction witnessed substantial growth, fuelled by the continuation of major private sector projects and escalated public investment in infrastructural development.
“Overall, the total real GDP (gross domestic product) for the quarter grew by 4.1 per cent. Inflation rates slowed but remained moderately high as of February 2024. However, the labour market showed signs of improvement, evidenced by a decrease in unemployment claims,” Greenidge told reporters.
He told reporters that going forward, the government incentives to agriculture could improve the sector’s output in 2024, but adverse weather conditions could affect this outturn.
He said the introduction of a new domestic feed producer is expected to provide an alternative source of feed for farmers.
“The 2024/25 Budgetary Proposals and Financial Statement (BPFS) included incentives for local milk producers to increase output through tax rebates. Orders of young chickens are on the rise, and capacity is expected to expand further with new pens under construction that should begin operation later in the year.
“However, adverse weather conditions are expected to persist and climate shocks could continue to have a negative impact on general agricultural production.”
Greenidge said that the tourism sector is poised to experience another productive period, predicting that the second quarter of 2024 is expected to exceed tourist arrivals registered in the comparable period for 2023, bolstered by the hosting of the International Cricket Council (ICC) T20 World Cup and improved air access.
“Forward bookings up to the mid-point of 2024 stand above last year’s tally, and the market should benefit from increased seating capacity with additions to existing and new routes. Cruise traffic between June and August is slated to restart for the first time since 2021, with 12 cruise calls scheduled for this period. Long-stay tourist arrivals are predicted to reach pre-pandemic levels by the end of the year, while in transit cruise passenger arrivals are expected to reach approximately 75 percent of the pre-pandemic average”
But the CBB warned that downside risks could present themselves via upward movements in ticket prices and potential disruptions from the hurricane season.
The bank said that risks to the future economic prospects for Barbados remain balanced for 2024, with steady growth and disinflation in the world economy.
The CBB noted that the April World Economic Outlook forecasts a more gradual economic slowdown than previously anticipated, accompanied by an upward revision to global growth prospects.
Greenidge said nonetheless, international growth is projected to linger below the historical average of 3.8 per cent for the period spanning 2000-2019.
“This subdued trajectory is attributed to heightened central bank policy rates aimed at curbing inflation, the gradual withdrawal of fiscal support measures, and underlying lower productivity growth.
“Several downside risks persist, including geopolitical conflicts in various regions, constraints in freight supply, and prolonged tight monetary conditions driven by strategies to manage inflation. These global developments have the potential to influence the tourism outlook for Barbados and contribute to imported inflation pressures.”
He said domestic inflation is projected to moderate over the medium term, moving in tandem with falling international commodity prices.
The CBB projects that the 12-month moving average inflation rate is expected to moderate between 3.5 and four per cent by the end of 2024, underpinned by falling international food prices and moderating oil prices.
“However, the inflation forecast remains susceptible to disruptions in the supply chain, stemming from ongoing international events, such as the Russia-Ukraine War, the Israel-Hamas conflict, tensions in the Red Sea, and persistent congestion in the Panama Canal,” the CBB said.
It said furthermore, the occurrence and severity of adverse weather conditions domestically could lead to localised food shortages and exacerbate food price inflation.
But Greenidge told reporters that nevertheless, ongoing negotiations for trade agreements with Caribbean Community (CARICOM) countries aimed at bolstering commodity trade hold the potential to contribute to inflation moderation over the medium term.
He said gross international reserves are expected to maintain a healthy position at the end of 2024.
“Continued growth within the tourism sector, complemented by the hosting of major sporting events, including the 2024 ICC Men’s T20 World Cup, is expected to bolster tourism receipts and improve the current account.
“Moreover, private foreign investment inflows, particularly linked to the tourism sector, along with public sector inflows from multilateral development banks, are anticipated to sustain international reserves at a level equivalent to an import cover well above the accepted international benchmark of 12 weeks.”
Greenidge said that public sector reforms and growth enhancing initiatives are expected to strengthen government’s ability to achieve targeted primary surpluses while supporting domestic economic activity.
He said the recently delivered budget speech by Prime Minister and Minister of Finance, Mia Mottley, focused on enhancing fiscal discipline and promoting economic growth.
Restructuring of state-owned enterprises (SOE), including the dissolution of the Barbados Agricultural Management Corporation (BAMC), the amalgamation of the Rural and Urban Development Corporations (RDC and UDC) into the newly formed National Development Commission (NDC), and the reform of the National Housing Corporation (NHC), are expected to reduce overlap and achieve financial and operating efficiencies in the medium-term. “Moreover, the digitisation of the public sector and the creation of a National Data Centre, led by the newly established Gov Tech, also aim to improve the efficiency of public sector services.”
Greenidge said that the reform and modernisation of the corporation tax structure, aimed at meeting the Organisation for Economic Co-Operation and Development (OECD) Inclusive Framework Global Rules, are anticipated to yield a net tax positive impact on the medium-term revenue outturn.
“The 2024 budget speech also outlined planned public sector investments, such as road and water infrastructure projects, the ongoing construction of the Geriatric Hospital, refurbishments to public health facilities, and the construction of sporting facilities, as well as measures geared towards improving climate resilience, and promoting sustainable and inclusive economic growth.
“The success of these and other fiscal initiatives are crucial to achieving the targeted primary balances necessary for ensuring debt sustainability in the medium and long-term.”
Greenidge told reporters that the debt-to-GDP ratio should continue its downward and sustainable trajectory ansd that the renewed interest in the domestic securities market alongside external borrowing are expected to assist in financing the Ggvernment’s needs. “Despite the increase in debt over the period, the expansion in economic activity and sustained primary surpluses are expected to pave the way for achieving the 60 per cent debt target by financial year 2035/36,” Greenidge added.
