Brief on the Barbados Economy

THE BARBADOS ECONOMY 2014

 

 

The economy of Barbados exhibited weak but positive signs of growth at the conclusion of the 2014 calendar year. Real GDP remained relatively flat compared to the previous year which registered a 0.2 per cent decline. Growth in the tradable sector fell by -0.3 per cent with the exception of tourism value added which expanded by 1.6 per cent. The fall in tradable activity was attributed to declines in sugar and manufacturing production which fell by 14.7 and 3.0 per cent respectively.  

 

Correspondingly, in the non-tradable sector there was a +0.3 per cent increase in growth primarily based on a 20.5 per cent expansion within the mining and quarrying sector which contributed to the balanced outcome. 

 

Per Capita GDP (basic prices) decreased by an estimated 1.6 per cent to record BDS $26.5 thousand (US$13.25 thousand) compared with BDS$27.0 thousand (US$13.5 thousand) in 2013. 

 

At the end of 2014, the NIR of the monetary authorities fell by 8.0 per cent to $1,052.2 million compared with $1,144.2 million at the end of 2013. In addition, the import reserve cover for goods and services stood at an estimated 14.5 weeks relative to 15.6 weeks registered a year earlier.


There was a slight increase in prices during the 2014 period as the average rate of inflation rose to 1.9 per cent from 1.8 per cent at the end of 2013. The unemployment rate also rose marginally to 12.3 per cent, compared with 11.6 per cent at the end of 2013. At the end of 2014, there were 124,800 employed persons in Barbados. This represented a decrease of 6,600 persons when compared with 2013, when 131,400 persons were recorded. The total labour force was estimated to be 142,300 persons a decline of approximately 6,400 persons when compared with the same period. 

 

The resident population was estimated at 276.9 thousand persons, a decline of 600 persons when compared to 277.5 thousand in the previous year. 

 

The number of new entities licensed in the entire international business sector at the end of 2014 totaled 518 as compared with 519 entities in 2013. Specifically, as it relates to International Business Companies (IBCs) there were 442 new licenses granted as compared with 438 in the previous year.

 

In relation to tourism activity, long stay tourist arrivals increased by 2.2 per cent. The principle driver of this growth was the UK market which rose by 10.7 per cent compared to the 2013 period. Additionally, the German market increased significantly by 16.4 per cent while the remaining European countries together recorded an aggregate growth of 6.4 per cent. These positive developments helped offset the fall-off in key tourist markets. The USA tourist market which represents Barbados’ second largest tourist market suffered a decline of 1.7 per cent and Canada the third largest tourism source market declined by 2.2 per cent. Arrivals from Trinidad and Other CARICOM markets contracted by 11.7 per cent and 8.7 per cent respectively.

 

Exports of goods and services increased by an estimated 1.1 per cent to register $3,206.6 million compared with $3,172.7 million recorded in 2013. In contrast, imports of goods and services decreased by 0.6 per cent to record $4,249.3 million. The primary market for Barbados’ domestic exports continued to be CARICOM, with a market share of 35.4 per cent. Exports to this group of countries increased by 1.6 per cent, to reach $336.0 million compared with the $330.8 million recorded for 2013.  The value of total imports (cif) fell by 1.7 per cent to $3,478.4 million compared with $3,538.6 million in 2013.

 

At the end of 2014, Barbados recorded a reduction in its external current account deficit as a result of increased export earnings as well as a fall-off in retained imports. The capital and financial account balance was estimated at $603.1 million which was boosted primarily by long-term private inflows. The balance on the external current account was estimated to be in deficit by approximately $738.0 million or 8.5 per cent of GDP (at market prices).   This represented a reduction in the deficit when compared with the deficit of $793.4 million recorded at the end of 2013.

 

The overall fiscal deficit for the fiscal period 2014/2015 stood at an estimated $1,439.9 million which represented 7.2 per cent of GDP compared with 11.2 per cent recorded in 2013/2014. The improved fiscal outturn was on account of significant boosts in revenue earnings and gradual reductions in total expenditure. The deficit was financed primarily by domestic sources totaling $1,377.2 million, while foreign financing amounted to $62.7 million. Preliminary estimates revealed that total revenue was projected to increase by $180.75 million or 7.8 per cent to $2,489.2 million while total expenditure was estimated at $3,929.1 million. The major factors contributing to the increased revenue intake were taxes on ‘goods and services’ which increased by 3.8 per cent and taxes on income and profits which was projected to increase by 13.1 per cent. While on the expenditure side the major reductions were transfer payments which stood at an estimated $1,084.2 million, this represented a 14.0 per cent decline in expenditure and a 29.0 per cent of overall current expenditure.

 

Domestic debt service at the end of December 2014 stood at an estimated $1,258.4 million compared with $1,154.5 million at the end of 2013. Comprising total domestic service commitments were amortization payments which stood at $601.1 million, an increase of $49.4 million, and interest payments which amounted to $657.2 million, an increase of $54.4 million. At the end of the review period, the sinking fund was estimated at $819.1 million.

 

The stock of central government debt stood at an estimated $11,381.4 million or 130.7 per cent of GDP at market prices. This represented an increase of $568.9 million or 5.3 per cent over 2013. Domestic debt stood at $8,536.5 million which is representative of 98.1 per cent of GDP (market prices). The level of foreign debt stood at $2,845.0 million or 32.7 per cent of GDP, an increase of $176.5 million.

 

During the 2014/2015 fiscal period the revenue   measures emanating out of the 19-month fiscal adjustment programme has raised an estimated $84.0 million. Revenues from municipal tax amounted to $36.0 million while the consolidation tax and the asset tax on financial institutions yielded $29.0 million and $19.0 million respectively. On the expenditure side, the measures put in place to reduce spending in major areas such as personal emoluments, subsidies and transfers, inter alia have over the review period reduced overall spending by 0.3 per cent or $10.4 million.