…Driven by severely diminished activity in tourism, weaker than anticipated investment, reduced consumption
The Barbados economy has contracted by as much as 17.6 per cent during 2020 based on preliminary estimates by the Central Bank of Barbados.
The sharp fall reflected the combined effects of the severely diminished activity in the tourism sector, weaker than anticipated investment and reduced consumption arising from lower employment incomes and increased uncertainty. The preliminary figures were released by the bank in a 24-page document titled Review of Barbados’ Economic Performance January to December 2020.
The document concluded that 2020 was an especially difficult year for the Barbados economy, as COVID-19 triggered global recessionary conditions and curtailed international travel. Despite an uptick in arrivals during the fourth quarter, the Barbados Central Bank preliminary data showed that visitor arrivals by way of airlift declined by 71 per cent for 2020.
Cruise arrivals declined by 64 per cent. Revenues declined by 12 per cent, which was the result of lower collections of transaction-based taxes. The returns from value-added taxes fell by $185 million while excise and import duties registered reductions of $56 million and $23 million, respectively.
Manufacturing was down and spilled over in other sectors
Manufacturing export demand was also down, as economic activity in Barbados’ main export markets, the Organization of Eastern Caribbean States softened. The spillover impact on other sectors was substantial, particularly during the second quarter but there was a partial recovery during the last six months of the year.
Nonetheless, Government registered a primary surplus of $243 million, given a stronger than forecast improvement in corporate tax collections. The overall fiscal deficit was $36 million or 0.4 per cent of gross domestic product for the first nine months of the fiscal year.
The stock market and housing market recovered from lows in March and April, respectively, thus indicating signs of a return of confidence.
At year-end, gross international reserves stood at US$2,661.9 million or 40.3 weeks of imports. Reflecting on the impact of the economic dislocation, the Barbados Central Bank contends that “the hope for a strong partial recovery in 2021 has been muted by the heightened uncertainty caused by the ongoing raging effects of the virus in our key tourism source markets, new country lockdowns and travel restrictions”.
The stock market and housing market recovered from lows in March and April, respectively, thus indicating signs of a return of confidence. However, the persistence of the health crisis means that uncertainty abounds about the durability of the recovery.
Agriculture was up but chicken production contracted
Unlike in the rest of the economy, agricultural output was 1.9 per cent higher than a year ago. The main source of the growth was higher food crop production. Chicken production contracted as tourism and local demand were depressed while milk production suffered from heat-related stress and a deterioration in grazing pasture conditions.
In the non-traded activity, the spill-over effects of the downturn in tourism was especially felt in the wholesale and retail and business services sectors, including real estate, car rentals and the ancillary services provided to the tourist industry. Reduced activity during the lockdown period and lower demand arising from the fall in incomes were largely responsible for the sharp decline.
The uncertainty related to the pandemic contained new private sector investment, particularly in the tourism sector. As a result, construction activity declined by over three per cent, despite implementation of public and private sector projects such as the Harrison’s Point Isolation Facility, the repaving of the Grantley Adams Airport runway, the resumption of the Sandals expansion and Ocean Two Resort.
The challenge facing governments like Barbados is to find a balance between promoting safe health care practices while creating an environment to curb the lingering recession effects of unemployment and corporate bankruptcies.
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