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George Brathwaite
Submitted by George Brathwaite, PhD Candidate (International Politics)

The ‘jump and wave’ season in Barbados has forced us to do more than merely ‘put our hands in the air’ and ‘wuk up’ to the rhythms of sweet soca. The people are ‘pooching back’ on several fronts knowing that although the beat to ‘home drums’ are still within the remit of the populace, other international occurrences do impact on what happens in Barbados.

With talk of the IMF and global recession denting earlier public perceptions of Barbados’ growth patterns throughout the late 1990s and up to about a year or so ago, a number of familiar cries are caught amidst the sobering effects of the ‘Crop-Over’ music. Is Barbados on alert? If so, what kind of alert? And, how is it possible to overcome the shock of waking up next morning to the sounds of RPB or TC knowing that you have joined a growing number of persons categorised as the unemployed?

I am convinced that there is little comfort when the Governor of the Central Bank of Barbados says that we are in recession. Dr. Williams asserts that “we have seen the performance of the American and European economies” yet she goes on to wonder “why should people be any more afraid by hearing the word recession than they would have before?” Clearly the Governor is attempting to bring some reassurance to Barbadians; but does this sentiment not amount to an alert? I stress on this especially since the vulnerability of Barbados to exogenous shocks and economic volatility are more debilitating due primarily to our economic size and dependence on the need to earn substantial foreign exchange than obtains in America or Europe.

Perhaps more staggering because it becomes individualised in the scheme of things is that while using statistical data “up to March 31, 2009,”  the Governor pointed out that for the first time in the history of Barbados’ employment records, there were more men than women out of work over the first six months of 2009. This represents crisis in the context when in various spheres, persons are already alluding to the declining ability for attracting men into certain jobs namely teaching, the police, nursing and I can go on to add other categories. Linked to rising increases of unemployment and the pauperisation of men in global countries is the trend of growth and intensity in crime. We in Barbados cannot overlook such a possibility despite the hard work coming from our dedicated police men and women.

In similar regard, the problems facing the Barbadian economy at this time are equally social as they are economic. It is not surprising that the Prime Minister of Barbados continues to ride on a goodwill that springs from his momentous 2008 electoral victory in which people genuinely anticipated social and economic stability to be maintained. If changes were to come about, these were expected to be for the betterment of the Barbadian society. The Prime Minister now appeals to Barbados’ sense of resilience and “the perseverance and the ability of Barbadians essentially to stand up and defend what they thought was important to them.” I too choose this path notwithstanding that the Prime Minister reminds me of a former Prime Minister who told Barbadians that “I am taking you in my confidence. We have no intentions of cutting back on any employment at this stage.” Within months of that statement there was a rapid rise in unemployment which culminated in a trek to the IMF.

To be sure, and wanting to alienate Barbados’ position from what occurred when Mr. Thompson himself was a previous Minister in Government, and to draw a line of separation between Barbados and its CARICOM neighbours, the Prime Minister suggests that “Barbados still has an investment grade rating so we can still go to the capital markets … so that we are not in the exact position like Jamaica.” While I generally view myself as an optimist, my concerns compel me to probe more into the Prime Minister Thompson’s statement.

I am not buoyed by the fact that Barbadians appear unable to take this pacifying comment made by the Prime Minister with a sense of assurance. Indeed, there is some apprehension given that we do not have to be in the exact position for which Jamaica found itself in the past to become destabilised as a country. Barbadians do not cherish the idea of being reasonably close even if not in a similar position as Jamaica finds itself today. Jamaica has once again turned to the IMF for US$1.2 billion, the maximum it can get under a Stand-By Agreement.

The truth is that the Leader of the Opposition – Miss Mia Mottley’s query comes much closer to the real anxiety being quietly and gradually more expressed by Barbadians. That is, once Barbados has accepted the utility extended by the IMF so that the country can take advantage of its allocation under the Special Drawing Rights (SDR), and subsequently the use of these financial injections does not bring about the envisaged economic stability, avert the increasing numbers being put on the breadline, or turn around the recessionary decline, then what next? Answering this all important question becomes the crux of what Barbadians are feeling – fear at this time without being panic-stricken.

It is my contention that preparedness for weathering the economic storm would need us to pay particular concern at this time to the social stability of the country. This means not only emphasising the proposed initiative for government intervention in the market with the possibility for “the elimination of the middle man” so that consumers get an ease with the high costs of living, but it means that Government has to be sensitive in areas where such things as increases in water rates are not set vexingly high at this time of recession when more persons are finding themselves unemployed.

The current administration cannot afford to bring disquiet on the one hand to the private sector while on the other hand attempt to sideline them; the DLP administration should not simultaneously ask private consortia to keep persons employed while invoking an argument to rid the consumer of job providers. It is true that on November 23, 1993 in the House of Assembly, Mr. David Thompson said then that “the Barbadian private sector has no claims to greater levels of efficiency than the Government and there is a lot of evidence of that.” Even in acknowledgement that this could be the case although I think differently, evolving times do bring about significant changes in regards to perceptions and realities.

Rivalry in the public/private scenario to which the Prime Minister believes that “the distributive sector has not been as sensible as it should have been in responding to consumers” may hold merit but may also run contrary to really enhancing opportunities for easing the burden on ordinary peoples. Now is not a time for government to setup itself as replacement for private sector initiative and entrepreneurship. I urge the Prime Minister to proceed through negotiation and diplomacy rather than through legal declaration and/or autocratic connivance.

It is further compelling that the current administration has to do more than expand the social net to accommodate persons disconcerted from being pummelled into the abyss of unemployment. Pronouncements that the “period of benefit is extended from 26 to 40 weeks,” is the extension of a social entitlement by the state apparatus, but rest assured, persons have to maintain their security in employment (i.e. public and private sectors), and more training coupled with re-skilling has to take place, and leadership has to be aptly demonstrated by the Prime Minister, the administration, and the public sector.

These actions are preferable to that being manifested whereby Members of Parliament from the government side appear overly to concentrate on the blame-game without prescribing clear-cut goals for the socio-economic development of all Barbadians, and frustratingly, the opposition Members of Parliament seem distracted having to waste time and energy on defending a period of unprecedented socio-economic growth and people empowerment in Barbados (i.e. 1994-2007).

This is a prime opportunity for the incumbent Government of Barbados to demonstrate innovativeness. The administration through its leadership, policies, and actions has to show willingness and the capacity to socially and economically engineer change for the better. In a democratic society, differences of outlook ought not to be silenced by those wielding political power and relative control over policies and the public purse. Opposition political parties, civil society, and all manner of advocates can make meaningful contributions thus keeping the electorate in tune with prevailing events. In this way the country benefits and the people are comforted in part by the realisation that alternatives do exist.

I end this provocative piece by reminding Barbadians of the words that the then Prime Minister, the Honourable Erskine L. Sandiford stated: “we Barbadians have all worked too hard to build up our economy, society and culture to allow a stranger to come within our gates and arrogantly seek to pull down what we, as Barbadians, with pride have built up over the years.” Using the SDR facility is to our advantage, but reverting to the IMF for concessional or other loans is not a desired option for advancing this country’s need. We need to work together for the good of all Barbadians during this period of recession. Working together however does not mean always having the same mind-set.


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  1. The USA economy has shown a tangible incease in its GDP.

    This should augur well for Barbados and the world.


  2. US GDP fell by 1% again in Q2 2009.

    The first time four consecutive decreases have ever been recorded.

    Don’t hold your breath.


  3. @Facts

    I think this “Tangible increase in GDP” has been due to nothing but the stimulus funds.Many here in the US are wondering what happens when the money runs out.The US doesn’t have the resources to spend another stimulus unless we borrow even more from the around the world.While GDP forecasts for China is expected to rise @ ~8.5% compared to a contraction of the US economy @ 1%.

    The good news however is that depending on where someone lives in the US jobs appear to be coming back specifically in Republicans state which have low unemployment statistics.


  4. Dont hold your breath, the US economy
    is still on life support and will not show any signs of consistent positive recovery until the midddle of next year(2010).


  5. wait a minute. Don’t you all realize that George Brathwaite has written a “provocative article”? ha ha ha lol!

    What I took away from it is that he can refer to the time Thompson was a minister of government (previous to now) but the current Government is not to refer to the last 14 years. That Mia said something worthwhile. That discussions other than from government is being silence, and that Sandiford said
    [“we Barbadians have all worked too hard to build up our economy, society and culture to allow a stranger to come within our gates and arrogantly seek to pull down what we, as Barbadians, with pride have built up over the years.”]

    I wonder if the esteemed candidate for a PHD would allow me to use Sandiford’s statement to reflect on illegal immigration and on Shridath Ramphal’s imaginitive intimations of Barbados ethnic cleansing! uh just wondering.

    By George! your article is not provocative at all. It is but a redshirt version of what WIV would give us.

    It is my sincere hope that Lindsay Holders fact and statistical base opposition to illegal immigration, and to freedom of movement at this time, being an economist, can influence another economist by the name of Owen Arthur as he seeks to regain leadership of the BLP.


  6. When the BLP held power if Dr. Williams said something positive it was good, now that they are in Opposition when she says something positive it is all bad.

    What’s unchanged? Politics as usual in Barbados. What constituency is George Brathwaite a candidate in? what job is he auditioning for?

    Plus ca change, plus c’est le meme chose


  7. That is, once Barbados has accepted the utility extended by the IMF so that the country can take advantage of its allocation under the Special Drawing Rights (SDR), and subsequently the use of these financial injections does not bring about the envisaged economic stability, avert the increasing numbers being put on the breadline, or turn around the recessionary decline, then what next? Answering this all important question becomes the crux of what Barbadians are feeling – fear at this time without being panic-stricken.

    Does George have a point?
    By accepting the drawdown now is the government sending a negative message?
    Why not wait until we need it if the foreign reserve is adequate.

    We asked the question before, at what speed is Barbados currently burning foreign exchange? What are our foreign loan obligations?


  8. Did we not borrow, sold assets, encourage FDI by selling land, and instituted a CESS, to shore-UP, increase, and protect, foreign reserves?

  9. Wishing In Vain Avatar

    Adrian Hinds

    By George! your article is not provocative at all. It is but a redshirt version of what WIV would give us.

    It is my sincere hope that Lindsay Holders fact and statistical base opposition to illegal immigration, and to freedom of movement at this time, being an economist, can influence another economist by the name of Owen Arthur as he seeks to regain leadership of the BLP.

    Adrian this gigantic idiot George Brathwaite is yet to come to terms with the election result of Jan 15, while he sits and writes his nonsense little does he know the extent of the in fighting within his party camp, with Owing openly stating that he will retake the leadership of the BLP sooner than most would think or expect, more importantly is that there are reports flying around that it will not be a difficult process because EVERYONE within the BLP dislike Mottley’s style and method of Opposition..

    Reports also are that his move to emerge as the leader again will be a relatively easy one given the fact that just about every person knocking around the BLP have already blistered Mottley with curse from new comers like Dalton Lovell to more aged ones like Lynette Eastmond to ones who are known to love being nasty mouthed like Liz Thompson, they have all crossed swords with her recently as has been recently well documented in the media as per the blow out with herself and Eastmond.

    To add insult to injury when Rawle Eastmond could find no other person to pick and found no one worthy of the job of Constituency Council Chairman in St James North from his BLP people but he choose instead to appoint a sitting DLP Senator to nominate to this position it speaks volumes about the direction or lack thereof direction that Mottley has been able to show to the BLP as an Opposition Party.

    Reports reaching me state that any challenge that is made for the leadership of the BLP will be met with a joyous yes by all and sundry from within the BLP.

    Also of concern, it appears as if Dale Marshall is positioning for the role of Deputy Opposition leader and second to Owing but really my belief is that Kerrie Symmonds would fill this post much better but he has to sort out his maritial affairs and his office help affairs as well as settle his differences with the money he colllected for citizenship for Dr Boolani, only after he has cleaned up his mess will he be taken seriously.

    Just to show you the difference in focus and mind set of these two political parties both held fund raising events last evening in the case of the BLP and Mottley hers was a $ 250.00 ticket price that the proceeds go straight to her campaign funding program and attracts the elite of Barbados party scene, her major difference this year is that she was not able to divert public tax payers funding towards her fancy party for she and her ilk, in the past tax payers monies were used in no small way from projects like The VECO PRISON PROJECT, THE VECO OIL STORAGE PROJECT, THE DANOS 3S ROAD WORKS PROJECT, where in the case of VECO and the Prison it is a known fact that she collected $ 250,000.00 in supposely ticket sales and was paid this money out taxpayers hard earned money.

    On the other hand the DLP hosted their cruise last evening that saw a massive gathering of souls on board the Harbour Master paying the sum of $ 45.00 for their four hour’s of cruise, notice the difference right away in the prices and who the two parties really catered for with these two events, each cent for this DLP cruise came for the citizens of Barbados no foreign company money involved and the make up of the DLP cruise was rank and file members of the party who came out to support the fundraising effort to give school books and uniforms to those who need the help the most in our society . this yet again another knock against the BLP as the DLP will use their funds to help the community whereas Mottley will use hers to help bring her dream of her political MOTTLEY NAME AND ENTITLEMENT nearer home and into her coffers.

    So yes Adrian you are right he may well have another master to serve very shortly, also bear in mind that the articles being written by Mr Holder also are co authored or should I say assisted with the help of no lesser a person I am told as Mr Jerome Walcott so the plot thickens.


  10. If Barbados is leaking foreign exchange faster than it earns it, who will fix the leak?

    Does the GOB have the political will to limit access to non-productive sectors.

    Should companies who do not earn foreign exchange, have unlimited access for their imports, most of which, the country as a whole can do with out.

    Sooner or later, this can of worms will have to be opened.


  11. Exactly why you never shoot the messenger and forget the message. We live in tough times, I don’t care if you are a Big Dem, Buzzing Bee, or No Darn Party, if the IMF is closer than in the recent past, it is call for concern. If the unemployment rate is rapidly increasing (somebody told me by more than 3 and 1/2 percent in 2 years) then we have to be concerned. George, if we use this SDR to boost our foreign reserves, and it works out for us, will we be able to convince the IMF that we are capable of handling our problems? The thing is, I am doubtful of many things especially when we are getting loans on the international market along with the SDR, so it still puts us in some quandary. The DLP has to tell the people the exactly what is happening in the economy and stop hiding behind other issues, and as Brathwaite says, behind the sweet tunes of crop over. George you are more provocative than Adrian the expert Hinds would expect, the trouble is that he is stiffling in the vomit of his own envy.


  12. It is very disheartening that in today’s Sunday Sun (August 2, 2009) that there are no stories dealing essentially with the fact that Barbados is in a depression.

    And, yes, while one could understand why most stories in this edition would deal with issues and events surrounding the Crop Over Festival – because it is natural to have this great degree of Crop Over coverage at this stage in Barbados, given that it is Crop Over time, we in PDC nevertheless categorically resent the fact that in this leading Nation Edition – the Sunday Sun – there are NO stories dealing with this increasingly worsening political economic recession in Barbados.

    The fact of the matter is that the membership of the PDC is appalled at how the Nation Newspaper has conducted itself in this regard at this stage.

    And, there are NO excuses whatsoever for the failure of Nation Publishing Company to provide more information on what is happening materially and financially in Barbados at this stage.

    While we accept that it has been providing modest coverage in its daily editions – plus much information in the Barbados Business Authority in so far as to cover the whole of what they do publish on a daily basis in all its other newspapers on the so-called economy, the Nation Publishing Company must always carry in the Sunday Sun at this stage all kinds of information or articles on any events or issues related to this local depression, if the Nation Newspaper is to stand up to the test of really being the newspaper for all the people in Barbados, and for providing fair and balanced news coverage in the country.

    Believe it, though, this particular Crop Over will come to an end and the next one will start, and the massive problems associated with this recession will still be there. Therefore no amount of lack of coverage by the Sunday Sun concerning the effects this recession is having on people, business and other entities in this country, will be enough to wish such things away, and, more so, to reverse the misfortunes and sufferings of the victims of this depression in Barbados.

    If any thing the Nation Publishing Company ought to be relentlessly pursuing many truths with regard to how this depression is adversely affecting so many local people, businesses and other entities, and thus coming up with its own partial solutions to such problems.

    Finally, we in PDC do note, however, that there is contained in this said Sunday Sun ( pg 26 A) a very interesting story which deals with the fact that whereas the Governor of the Central Bank in her recent media conference on the review of the performance of the Barbados economy had stated that “commercial banks had committed to cutting interest rates on new and existing loans by 0.5 per cent in an effort to reduce borrowing costs to businesses” at this critical point in time, there is an element of doubt that is now being cast on such assertions by the representative body of island’s six commercial banks – the Barbados Bankers’ Association (BBA) – which is reportedly saying that such reductions would only take place – and wherefore customers have a contractual interest rate arrangement with their bank – at the time when there is a RENEWAL OR REVIEW of those contractual terms.

    But, the fundamental questions ( just four of them) that the PDC will ask of this body are :

    1) Who will initiate such a renewal or review – the customer or the bank? – and under what pre-conditions?

    2) when will such times of any likely renewals or reviews be?

    3) given the stated position of the BBA, what would be the commencement time and duration of these reductions in lending rates look like, given that there there is right now no agreement between the Central Bank and the BBA on the timing and legal scope of the implementation of the Central Bank led cuts in interest rates on lending lending? and

    4) Is such a position of the BBA acceptable or comfitting therefore to the Central Bank of Barbados, given its apparent new found desire to urgently but properly arrest the worsening business climate in the country?

    So, there we have: Down with the damned DLP and the blasted BLP!!

    PDC


  13. Above,

    All the US has to do is to print money (as it has been doing for the last 2 decades)

    The US can be flexible and daring in the printing of money as it’s “paper” is “world currency”.
    Underdevolped countries trying this do it at their own peril; as it’s local currency has to be backed by international currency or gold(but mainly, US dollars)

    I agree with Jay. If you are keeping abreast of the news, you will discover that the unemployment rate is generally, falling and seems to be stabilising.

    The stimulus funds injection will create a multiplier effect that will encourage consumer spending and increased investment.

    The restarting of goverment capital
    works projects will trigger private construction and investment in general.

    I suspect (and please take note) that the US economy will start shaking up in first quarter of 2010.

    ps. The British ecomomy and western europe’s is already taking shape.


  14. Record rise in UK jobless total
    UK unemployment rose by a record 281,000 to 2.38 million in the three months to May, the Office for National Statistics has said.

    The jobless rate increased to 7.6%, the highest in more than 10 years.

    The number of people claiming unemployment benefit increased by 23,800 in June to 1.56 million, which was less than analysts had forecast.

    Unemployment among young people has been especially acute, as firms cut jobs to reduce costs in the downturn.

    Fear of unemployment

    ANALYSIS
    Hugh Pym, chief economics correspondent, BBC News On the face of it, the unemployment figures are horrific. A record quarterly increase of 281,000 cannot be explained any other way.
    The total of 2.38 million jobless is the highest since late 1995, before Labour came to power in the aftermath of the 1990s recession under the Conservatives.

    But there is another side to the story.

    The rise in the narrower claimant count in June was less than expected.

    Experts are scratching their heads over this. June’s claimant count is the more up-to-date labour indicator.

    ONS Officials point out that the rise in claimant count over the three months to May was about 220,000 – not far off the 281,000 on the wider measure.

    But analysts are unconvinced. They want more analysis of the two measures.

    Young people – those up to 24 years old – have been particularly hard hit with unemployment leaping to a 16-year high of 726,000.

    The number of those out of work for more than a year rose by 46,000 to 528,000, the highest for 11 years.

    TUC general secretary Brendan Barber said: “It’s particularly worrying that over half a million unemployed people have been out of work for at least a year, including 133,000 young unemployed people.”

    “With a new generation of school and college leavers soon starting to look for work, our unemployment crisis will get even bigger.

    Separately on Wednesday a BBC survey suggested two-thirds of people across the UK know someone who has lost a job in the recession.

    A further four in 10 fear losing their job in the current climate, the survey of 1,048 people by ComRes indicates.

    ‘Conflicting signals’

    Even though economic conditions may be stabilising, economists expect unemployment to continue rising this year, as financial uncertainty persists.

    Vicky Redwood of Capital Economics said the latest figures contained “conflicting signals about whether conditions in the labour market are getting better or worse”.

    The increase in the unemployment total of 281,000 in the three months to May was the biggest quarterly rise since records of the ILO measure began in 1971.

    However, the rise in the claimant count in June was less than expected, and May’s increase in the claimant count was revised down to 30,800 from the original estimate of 39,000.

    “The claimant count measure of unemployment in June posted its smallest rise in a year. However, the wider ILO measure posted its biggest rise on record,” said Ms Redwood.

    But, she said, unemployment was unlikely to fall until economic growth returned to its trend rate, and this would take a long time.

    Of the different figures released, it is the internationally recognised ILO figure of 2.38 million that is the government’s preferred measure for unemployment, because it is a more comprehensive indicator of the job market.

    The Chartered Institute of Personnel and Development has called for an enquiry into this “conundrum” of the differing figures.

    Vacancies

    Average UK earnings including bonuses increased at their highest rate since December, up 2.3% in the three months to May from a year ago.

    However, excluding bonuses average earnings rose at 2.6% – the lowest rate since records started in 2001.

    David Kern, chief economist at the British Chambers of Commerce described the figures as “grim reading”.

    “On the basis of these numbers, we reaffirm our forecast that unemployment will peak at around 3.2 million next year.”

    “ It’s interesting to note that number of part-time jobs has risen slightly in the past year, as the number of full-time jobs has fallen ”
    Stephanie Flanders BBC economics editor
    Not only is unemployment rising, figures show that the number of jobs available has also fallen.

    The number of vacancies dropped to a record low of 429,000 in the three months to June, down by 35,000 from the previous quarter.

    The number of unemployed men increased by almost 200,000 to 1.46 million, and 84,000 more women were out of work, putting female unemployment at 923,000.

    Manufacturing

    Wales was the only part of the UK to see unemployment fall. During the three months to May, Wales saw 1,000 fewer unemployed people, putting the total at 107,000.

    In terms of unemployment rates, the West Midlands has the highest rate at 10.3% while the South East has the lowest at 6.1%.

    “ Soon I’ll to have to decide whether to cease trading and effectively make myself redundant ”
    Tim Baldwin Bristol
    Manufacturing jobs kept declining, down by 201,000 to a record low of 2.6 million.

    Urgent action is needed to address unemployment, explained Rachel Reeves, parliamentary candidate for West Leeds and a co-author of a report published on Wednesday by the Institute for Public Policy Research.

    “If we are to get Britain back to work, there will have to be large increases in the jobs available in hi-tech manufacturing and private service sectors such as the creative industries.”

    Story from BBC NEWS:
    http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/8151017.stm

    Published: 2009/07/15 14:13:04 GMT

    © BBC MMIX


  15. One has to wonder about the coming tourist season in Barbados in light of these figures. Can Barbados withstand the slump in the British economy knowing full well that the UK is the major market for Barbados?
    I am beginning to question the prudence of the Thompson administration to foot the bill for its summer camps, extending the social benefits from 26 to 46 weeks, and not speak to how government revenus will be enhanced especially since the Governor of the Central Bank stated last week that revenues are down further than anticipated. If we are not in a crisis, we are sure at the brink — we are in the doorway and nothing seems at this stage to be pulling us back from economic crisis. The Prime Minister, surely has to be more specific about his plans for economic recovery and the stimulus for creating jobs and reducing the unemployment levels.


  16. 26 to 40 weeks and not 46. Still a bold move with government revenue down.


  17. UK economy continues to contract
    The UK economy contracted 0.8% between April and June, more than double the figure economists had expected.

    While an improvement on the previous quarter, the figures may indicate that the recovery could take longer than previously had been thought.

    The contraction was much less than the 2.4% seen in the first quarter but was still above analysts’ 0.3% prediction.

    The latest figures take the annual rate of decline to 5.6%, the biggest fall since records began in 1955.

    Liam Byrne, Chief Secretary to the Treasury, said that he was cautious but confident that growth was going to return at the end of the year.

    “We are not out of the woods by any stretch of the imagination, but what today’s figures show is that the pace of the downturn is easing,” he said.

    The BBC’s economic editor Stephanie Flanders was less upbeat.

    “Anyone who was worried about the momentum of the recovery before will be that much more concerned now,” she observed.

    “Not least, because the recovery has yet to actually show its face.

    “”t makes it that much less likely that the Treasury will hit its forecast for 2009 of a 3.5% decline overall. From where we are now, you would need growth of maybe 1.5% or more in both of the second quarters to make the numbers add up.”

    ‘Out of abyss’

    Hetal Mehta, senior economic advisor to the Ernst & Young ITEM Club, said that the data showed that hopes for a recovery had run ahead of reality.

    “ The bottom line was that today’s number is pretty dire, and a sharp wake-up call for anyone who had already been dreaming of recovery ”
    Colin Ellis, Daiwa Securities
    “With credit still severely restricted, consumers and businesses continuing to retrench and world trade yet to pick up, it is hard to see any grounds for sustained optimism at the moment,” she said.

    The decline in economic output was driven by business services and finances, a sector that has been hit hard by the financial crisis.

    “We are clearly out of the abyss but still have a difficult time ahead,” said Brian Hilliard, economist at Societe Generale.

    Industry groups called on the Bank of England to continue its actions to stimulate the economy.

    “There is no room for complacency and suggestions of suspending quantitative easing are misguided. It is important to persevere with an aggressive policy stimulus to ensure that the economic downturn does not worsen,” said David Kern, chief economist at the British Chambers of Commerce.

    An advisor to the central bank had suggested on Thursday that the Bank may put its asset purchasing on hold.

    Harder to balance?

    According to the Centre for Economic and Business Research (CEBR), the worse-than-expected figures make it unlikely that the Treasury will be able to meet its own economic forecasts.

    In the Budget, the Treasury forecast the economy would decline by between 3.25% to 3.75% in 2009 and missing this target would make it harder for the Treasury to balance its books.

    “For this to now happen would require a remarkable bounce back in the second half of the year with growth of around 1.5% of the remaining two quarters,” said Richard Snook, senior economist at the CEBR.

    “Weaker growth than the chancellor expects means that public sector net borrowing will exceed the £175 bn projected for the 2009/10 fiscal year,” he added.

    TUC General Secretary Brendan Barber warned against spending cuts to curb borrowing.

    “They could tip the economy into an ever deeper downturn and make the deficit worse when the tax take falls and spending on unemployment goes up. With consumers and companies failing to spend, the public sector must fill the gap,” he said.

    The release is the ONS’s earliest estimate of gross domestic product and the figure is often revised as data for the full three months is not yet available for every sector of the economy.

    “The bottom line was that today’s number is pretty dire, and a sharp wake-up call for anyone who had already been dreaming of recovery,” said Colin Ellis at Daiwa Securities.

    Story from BBC NEWS:
    http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/8166457.stm

    Published: 2009/07/24 10:38:16 GMT

    © BBC MMIX


  18. Comment submitted by email:

    Borrow only from those who own you or you will be penalised, which in our case is quite easy to do.  Remember  the comment or warning "NOT A SHIP OR PLANE" in Indebtedness: No end in sight. We have no choice.

    Debt sustainability or defensive deterrence?

    10 January 2007

    Executive summary

    One year after the Multilateral Debt Relief Initiative, and the G8 promise of contributing decisively to the achievement of the Millennium Development Goals, some impoverished countries face tough decisions. They have new sources of finance to turn to, but the World Bank plans to penalise them if they do so.

    The Bank plans to curtail countries’ allocations under its low interest window, IDA, to any country that borrows at non-concessional terms from commercial or new sovereign lenders. These lenders are described by the Bank using the economists’ terminology of ‘free riders’. The Washington-based institutions argue that the new lenders are riding on the largesse of the Bank and Fund which has cancelled debts, and is threatening the previously indebted countries’ longer term debt sustainability. The Bank therefore wants to ‘incentivise’ low-income country governments by indicating that they will receive less from the Bank if they turn to these sources.

    There is a danger that the Bank’s actions might make it harder for governments to meet the MDGs, and push them to take on even more expensive loans to replace these gaps. A counterproductive spiral for borrowers could be started, while lenders would be let off the hook.

    It is in particular the actions of highly liquid emerging powers such as China that seem to be of great concern to the classical donor community. Long-standing creditor and donors correctly see the availability of large hard-currency reserves as both a threat to their monopolistic status in the development arena and to the capacity for low-income countries to maintain a sustainable debt situation after the cancellation rounds of the last decade. Unfortunately the rich countries do not recognize that impoverished countries’ interest in these new, more expensive financial flows is in large part a result of the insufficient amounts of concessional aid that they are providing. Not living up to their own word leaves some developing countries with an open dilemma: to develop risking renewed unsustainability, or to be stuck in underdevelopment because of a chronic shortage of available resources.

    Moreover, these new resources may also be very interesting to recipient countries because they come without the heavy conditionalities that are all too often attached to World Bank and IMF loans. While the absence of economic conditionalities may be welcome, the new lenders also neglect other aspects, such as human and civil rights, as well as environmental safeguards. This can risk creating further illegitimate debt. The actions and policies of these new actors must be carefully scrutinized.

    The possible implementation of punitive measures by the World Bank against low-income borrowing countries, and the total absence of any credible sanction toward lenders, also represents one more clear indication of the inequity and lack of effectiveness of the current international debt architecture. This new situation has again drawn attention to the absence of a transparent and equitable settlement mechanism that could effectively deter opportunistic behaviour and correctly evaluate the share of responsibility to be ascribed to the various parties. It presents an occasion to rethink the current system, by forcing the usual ‘club’ of creditor countries to acknowledge the insufficiency and the unfair state of the international debt architecture and consequently amend it.

    The same rich countries need to realize that this situation comes about largely because they are not doing what they have solemnly pledged to do. Poor countries would gladly accept cheaper financing if more of it was made available; as promised at the Monterrey and other summits. Denouncing China – a growing but still relatively poor country – because it is providing more expensive funds to the developing world is not the answer. They must live up to their commitments. If rich countries finally put their money where their mouths are, there wouldn’t be anyone ‘riding free’ out there.


  19. Now China is launching into renmimbi international trade and bypassing the dollar, US Treasury must feel a chill go down their spines.

    Up to $2 trillion pa, going to favoured nations and Asia (but not Japan), not passing through the US vaults.

    BRIC’s (Brazil, Russia, India and China) call for a new supranational currency, to replace the increasingly battered US dollar, is gaining ground.

    I don’t think these moves will attract the same US response as the last two countries who wished to trade oil in other currencies – Iraq and Iran.


  20. George Brathwaite is a political jackass.


  21. sylvan // August 3, 2009 at 10:05 pm

    George Brathwaite is a political jackass.

    Please, please, explain. Please define for me first what constitutes a political jackass so that I could see if there is any merit for the comment. From what I read in the article, there are some important things for us to consider. The big one is of course, what happens if the SDRs do not assist Barbados in the way anticipated, will we go to the IMF cap in hand? And because unemployment means so much to us that actually live in Barbados, will using the SDRs create jobs since the upcoming tourist season appears bleak based on those articles put out by the BBC? Tell me Sylvan! Seems like the jackass has more than a casual point. Give me evidence to suggest that political jackass Brathwaite is true to the name you give him. Put up or shut up Sylvan!

  22. livinginbarbados Avatar
    livinginbarbados

    @George Brathwaite
    “This is a prime opportunity for the incumbent Government of Barbados to demonstrate innovativeness.”[I made a similar point in my commentary on the recent budget, which appeared in the Barbados Business Authority on May 25. If you did not see it I can provide a copy. I took the view that the government missed the opportunity to do that: “Mr. Thompson stressed the need for innovation to help steer the country ahead, but the Budget contained few major innovations. His message was that we await the train of improving international economic conditions to pull us forward. Asking the country to rally together as “Team Barbados”and trying to sell the “Barbados Experience” of a country that wants to do better, are good sentiments but for me were not matched by bold action.”

    I find missing any mention of what I think is the real ‘Achilles heel’ at the moment–the increasing budget deficit and the rapid rise in the debt/GDP ratio and the debt service burden. They cannot be overcome in a short period of time, and while the PM/Finance Minister has pointed to the need to run primary surpluses I do not think that people understand the implications of that for revenue increases, spending decreases or both. Fiscal policy is anyway the pivot of government economic policy in any general sense, so its absence from your discussion leaves me puzzled.

    Because Caribbean countries have tended to demonize an approach to the IMF, they find themselves between a rock and a hard place, where the need for extra resources is clear, and the basis for a good economic program exists. Barbados is clearly free to avoid a borrowing relationship with the Fund but if the external financing need is clear the rest of the watching world will wonder how the country will cope. If there is really no external financing need then the country can proceed as before. But the reality is whatever. The danger is that countries often go to the Fund too late.]


  23. checkmate – 123, seems from your nonsense that you also fit the description. put up or shut up!


  24. @LIB

    How can you scoff at the reluctance of Caribbean countries Barbados included to engage IMF standby facilities? We look at Jamaica as proof that once in the clutches of an IMF program it becomes difficult to regain a good footing after. There is also the psyche of a people which must be factored. It is no secret that the maintenance of our parity of the Barbados dollar to the USA has defied the technocrats.

    On another blog we asked for the economist to explain the rate at which Barbados is expected to burn its foreign reserve announced at 1.3. billion. Also it is no secret the Caribbean countries with the exception of T&T carry a high debt burden and therefore any new government, Thompson government included leaves very little wriggle room to spark any reordering of the economy. LIB, you and George need to detail your proposals in a granular form, the nebulous stuff will not cut it.

  25. livinginbarbados Avatar
    livinginbarbados

    @David
    There is no scoffing.

    Look at the programs and look at what the countries did. Jamaica’s problems were not and are not caused by the IMF. It has a weak commodity based export sector (who markets have collapsed), a weak industrial production base (particularly struggling manufacturing sector, if I recall correctly), a huge debt burden that eats up around 60% of budget revenues, and was there before IMF programs. So, the room for manoeuver was never big. It has uncontrolled and largely unknown capital flows related to drugs that have real economic impacts but are not subject to economic controls.

    Maintaining a fixed exchange rate is much easier when your economy is small and not very diverse, but has a major necessary component,which is fiscal discipline. If that cannot hold then the fixed rate has to give or something else has to give (maybe jobs).

    Those who are outside government cannot answer your question about the usage of the reserves, other than to see what is the known debt service, and some expectation about inflows (tourism, remittances, FDI) and outflows (for imports of mainly oil, food, outward remittances, dividends remittances). If the government has other commitments and/or spends monies that you cannot see as commitments then those are drains, but it’s a question that can only really be answered by the Ministry of Finance and the central bank. When you have a team of IMF or World Bank economists discussing policy, they too will get a handle on that, but otherwise it’s guess work. Your guess is at least as good as mine.

    But, by maintaining a peg you disguise the pressure on the exchange rate, and other sectors have to make up the gap (see recent comments about the overvalued rate by some hotel sector entrepreneurs).

    It may seem nebulous to you, but those outside government should get their heads cut off for making detailed proposals when they have not had sight of details (and the budget had no overall revenue and spending tables, and the preceding budget estimates are broad). Point: government needs to either raise more revenue and/or cut spending. That’s known. The priorities and pain are for it to choose, and it is government who has constituents to satisfy.

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