Tag Archives: Barbados Economy

A Time to Execute With the Fierce Urgency of NOW!

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It has been more than ten years the Barbados economy has been performing poorly – a situation triggered by the global financial crisis of 2008. Some of us are old enough to remember the oil crisis of the 70s as well as the fiscal challenges of the 90s which negatively affected the cost of living for Barbadians. There was the global economic boom of the 90s that ended in the early 2000s which coincided with the Owen Arthur administration. Although Arthur is credited with overseeing a reduction in unemployment to 7% and creating an unprecedented number of jobs, it is fair to say he had an easy wicket bat on.

There is a generation of Barbadian who has not had to experience the level of economic hardship currently affecting the country. This is exposed by the national conversations being generated daily in the different fora. We have two arguments we should not conflate in the ongoing debate.

There is casting blame on the political leadership AND Barbadians at large for not influencing and implementing effective economic and social models to navigate exogenous shocks which small open economies are most vulnerable.

Now that we have mired in economic and social stagnation for more than a decade with a contracting economy; high unemployment especially in the youth segment, high debt to GDP, crumbling physical infrastructure, National Insurance Scheme in the cross hairs, judicial system operating under the stress of a heavy backlog to name a few – there is the fierce urgency of now that should give wings to policymaking and the execution of projects by the government and other stakeholders in civil society.

There is who to blame AND there is the urgent need to address the problem, NOW.

We are now faced with the fact that tomorrow is today. We are confronted with the fierce urgency of now. In this unfolding conundrum of life and history, there is such a thing as being too late. This is no time for apathy or complacency. This is a time for vigorous and positive action

Martin Luther King Jr

Let us blame who we want for the problems facing us today if we must, although sensible citizens will admit there is enough blame to go around to explain the current state of affairs in the country. It does not change the fact Barbados finds itself staring down the barrel of economic hardship for years to come. With economic hardship there will be the concomitant social challenges. We have already started to see an increase in violent crime, scant regard for traffic laws, increase in the homeless and vagrancy to list a few.

Against this pessimistic background we have the unions making demands, individual citizens making demands, private sector making demands, all comers making demands. It brings to mind the saying ‘a house divided against itself, cannot cannot stand‘.

Barbadians have been labelled an intelligent people. One does not have to be a rocket scientist to appreciate the country is in a pickle which means citizens all are also in the same same pickle. It therefore requires our government, public officials AND the majority of the electorate to sing from the same song sheet to confront an unprecedented challenge. Some will say this it is a naive expectation because it is the state of mind of households feeding the emotions of individuals. How can they be expected to overcome an innate behaviour to survive by willingly feeding in to the macro picture?

A more responsible media will have to play a leadership role to promote awareness of the issues especially of the financial variety. It is regrettable the toxic level of political partisanship that has seeped into how we manage our affairs of late. The death of Patrick Hoyos has expanded the vacuum in traditional media on reporting financial matters. Political parties have not been able to appoint competent players to challenge government’s army of financial actors. Academics from the UWI, Cave Hill expected to interject with independent analysis have been largely ineffective.

There is the reality that even if there is a COVID 19 vaccine found next year the pandemic has hastened the widening of the systemic cracks in the way we have been governing the country. To summarize what the BU intelligentsia has been opining, we have to set realistic objectives, develop smart action plans and EXECUTE with the fierce urgency of now.

Too Much Voodoo

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grenville-phillips

Submitted by Grenville Phillips II,

The year 2020 was my year for playing shots – using Clyde Mascoll’s recent cricket analogy. This was to be the year of making significant investments, all of which would have benefited Barbados and Barbadians. Then Clyde got in the way.

Like so many other Barbadians, I have a mortgage. The only benefit of a mortgage is that it allows you to occupy your house about 10 years earlier. For that privilege, you get to pay the bank a lot of interest.

The amount that you borrow is called the principal. The amount that you repay is about 2.5 times the amount that you borrow. Therefore, if you borrowed $500,000, you get to repay the bank about $1.25M over 30 years.

The amount that you repay the bank, over what you borrowed, is called interest. The interest is about 1.5 times what you borrowed. So, if you borrowed $500,000, then you must repay the bank the $500,000 you borrowed, plus 1.5 times that amount, or an additional $750,000 in interest.

The amount paid to the bank during the first 10 years is almost the same as the amount you borrowed. While most of the amount you pay during the first 10 years goes towards the interest payments, some goes towards the principal.

If you had a responsible employer, then you likely have a retirement savings plan with an insurance company, or a bank. When you reach 55 years of age, the retirement funds must be paid to you. I encouraged persons to use those funds to pay the remaining principal, rather than paying interest for the next decade or two.

Over 5 years ago, I started warning people that the DLP would try to tax our retirement savings. By that time, they had taxed everything that could be taxed, and retirement savings was perhaps the only thing left. So, I tried offering economic growth proposals that did not require additional taxes.

Trying to get anyone to listen to economic growth plans 5 years ago appeared to be impossible. The national: accounting, economics, banking, and business organisations seemed to have only one aim – to get the DLP out of office, and the BLP in. The Chamber of Commerce actually passed a regulation to prevent me from sharing our economic growth plan with their members. That regulation is still in place – but only for me.

Even the DLP would not listen – they seemed to have the same agenda. So, one year later, our economic growth plan was published for public scrutiny, and Solutions Barbados was formed to contest the general election, and implement the plan for the benefit of the public.

If families could pay off their mortgages early, then everybody wins. Families would have significantly more disposable income to ‘play shots’, the government would reap the tax benefits of that additional spending, and banks would need to compete for short-term business growth loans – or go under.

During the general elections, I was on a panel with Clyde, where he told the audience that our plan was ‘voodoo economics’. So, we provided our anti-corruption, quality management, low-tax economic growth plan to individual economists and accountants, and received a very favourable report.

The independent expert confirmed that we could achieve $1B in surplus during our first year, without borrowing, laying off a single public worker, or reducing salaries. He further noted that all political parties pushing high-tax austerity needed to review our plan.

After the general elections, Prime Minister Mottley, to her credit, acknowledged that the BLP did not have all the answers, and instructed her party that all ideas must contend. But Clyde would not. The BERT leadership publicly admitted that they never looked at our economic growth plan, and dismissively noted that they would never look at it.

Last week, BERT signalled that they had failed miserably to grow the economy. All they had to show for the past 20 months is: severe austerity, high taxes, zero economic growth, and arrogant public relations to hide their gross incompetence.

Last year I reached 55 years – but it was too late for me. The clown car had rolled up the year before, and Clyde and company tumbled out – and started performing tricks. They did what I was warning that Sinckler would do – but wisely chose not to. They confiscated much of my retirement savings, and passed a lunatic law to make that theft legal.

Mercifully, they left me with just enough that I could still pay off the mortgage, and start playing shots this year. But that was too much voodoo for Clyde. So, they decided not to release all my money until 2033. They have now entered the comedy phase of their routine – telling us to ‘play shots’. With what Clyde, with what?

Grenville Phillips II is a Chartered Structural Engineer and President of Solutions Barbados. He can be reached at NextParty246@gmail.com

Two More Years

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The article (below) by Barbados Today attempts to capture the contribution on VOB 92.9 Starcom by Minister in the Ministry of Finance Ryan Straughn on the economy and his forecast. To be honest after listening to Straughn – a key man on government’s finance team – the blogmaster was not optimistic the country will see an ease in two years. There are no shovel ready projects and the those in the pipeline are all tourism flavoured.

The banking systems is reported to be awash with money: Barbadians not borrowing, banks not lending or both. There is the sick National Insurance Fund. Not exhaustive but there is a beleaguered middles class who has endured belt tightening mode for more than 10 years under permutations of the Medium Term Fiscal Plan and the Medium Term Development Plan. Now there is BERT!

Thanks to @John A

David, blogmaster

Two years to ease

Marlon Madden

Article by
Published on
February 4, 2020

Minister in the Ministry of Finance Ryan Straughn is confident that households and businesses should start getting more wiggle room in another two years so they can start spending more again.

However, he insisted that a lot would depend on construction projects getting started.

He said despite geopolitical developments globally, the Mia Mottley administration has laid a “relatively certain” platform over the past 20 months that should encourage growth in coming years.

“The economy as we begin 2020 is delicately poised. This has come after the hard work of the Government to provide an era of stabilization over the last 20 months. Therefore, what we are anticipating for 2020 and going forward is an acceleration of the implementation of the reforms at the macro level and the unlocking of growth is going to be critical with respect to the average Barbadian seeing the benefits of the work we have done over the last 20 months,” he said.

“Nationally, there is a level of stability that allows businesses and individuals to plan. Therefore, as the Government gets itself right with the people and the public by repaying the arrears that were built up over the last ten years, I anticipate that the position of businesses and households in this country will change over the next two years,” said Straughn.

He said most households were not saving as they used to ten or 15 years ago, adding that until new infrastructure projects were started and consumption patterns change, growth would continue to be lacklustre.

The Central Bank last week predicted growth of between 1.25 per cent and 1.75 per cent for the economy this year.

Straughn said Government was doing what it could to encourage more economic activity by paying tax refunds it owed businesses and invididuals.

“The position that households and individuals find themselves in is that. like the Government, as we are paying persons now and trying to do so in an accelerated fashion, they are in a situation where they are paying down some of the debt they have.

“Therefore we are not seeing as yet new consumption, new investment, and certainly that could not have happened over the last 20 months, simply because of the nature we had to unravel Governments link in all of that,” he explained.

Insisting that people between the ages of 50 and 65 did not have the same level of savings they did 15 or so years ago, Straughn said they were now struggling to replenish that and they had to compete with younger people for jobs to do so.

He also acknowledged that there had been no salary increase for some time, forcing individuals to use what savings they had to pay down debt.

Straughn insisted that with Government paying the hundreds of millions it owes individuals and businesses in refunds space would be provided for more spending power and funds for investing.

Government had indicated that for the first two years of the Barbados Economic Recovery and Transformation (BERT) programme it would pay outstanding tax returns from 2011 to 2016.

Straughn, who was speaking on Voice of Barbados’ Down to Brasstacks on Monday, was not in a position to say how many companies Government owed or how much of the approximately $400 million has so far been paid. Those payments started in April last year.

In relation to individual refunds, Straughn said payments for the years 2011, 2012 and 2013 were complete.

In response to a query from a caller, Straughn gave the assurance that any hold up in income tax returns for 2018, was not as a result of Barbados Revenue Authority not having any money.

 

Central Bank Review of the Economy – Growth Forecast

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Governor Cleviston Haynes delivers the Central Bank of Barbados’ review of Barbados’ economic performance in 2019 and takes questions from the media and the live online audience.


Central Bank of Barbados’ Review of the Barbados Economy in 2019.pdf (4.16 MB)

Trapped by Financialzation

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“The lost decade since the financial crisis is living up to that old adage that when you get economists in a room, you’ll get eleven opinions. The old guard is unable to explain to people just what on Earth is going on”– Grace Blakeley

A pulse check of the level of debate concerning all matters affecting Barbadians in this space and elsewhere has fallen short of the mark, IF, we are to be regarded as an educated people. Of concern is the gimmickry we accept from our political and civil leaders instead of reasoned perspectives and efficient implementation of projects. Some say this is where education has failed us.

Many of us align to views based on political allegiance, school tie, built up neighbourhoods and the like. In recent days this blogmaster has retreated from the incessant stream of nonsense which abounds to read. On the bed stand is the book Stolen (How to Save the World from Financialisation) by Grace Blakeley. Although Blakeley’s focus is on the United Kingdom and USA her observations are relevant to Barbados given we are an island buffeting in the exhaust of global turbulence.

The relevance of what financialization to the Barbados space defined in the book as the

…increasing role of financial motives, financial markets, financial actors and financial institutions in the operation of the domestic and international economies. In other words, financialzation means more and bigger financial institutions – from banks, to hedge funds, to pension funds – wielding a much greater influence over other economic actors – from consumers, to businesses, to the state (blogmaster’s emphasis)…

should be of interest given the approach being undertaken by government to stabilize the economy. It seems we have wired our success to a financial model sector as a means to fuel growth. A good example is the ease we accept asset growth in the financial sector which translates to household and commercial debt and – wait for it – a widening current account deficit.

The blogmaster posits that a variant of financialization has exposed  itself in Barbados by the wholesale sell out of local companies fuelled by the expectation of shareholders to maintain profit margins. The government cannot dictate or influence credit or pricing policy given the close 100% ownership of the financial sector. Local players cannot influence the price of food because the major supermarkets and wholesalers are foreign owned. Even the entertainment space is controlled by foreign agents.

The author makes the point that households traditionally worried about wages and wage bargaining, these days they worry about debt. Businesses historically focussed on producing a quality product or service in a market space there had a competitive edge or advantage, these days it is about monitoring share price, dividend scheme,s borrowing and watching key performance metrics. For both individual and business it has become fashionable to borrow more than earn. Therein lies the problem – a conspicuous consumption model fuelled by greed.

To the blogmaster’s simple way of thinking we have a financial system that prey on the establishment by extracting interest earned from burgeoning debt. In such a model only the owner of capital will benefit from the riches.

The thesis position of the book is that we are living through the tail end of finance-led growth and that every capitalist model must end in crisis. It is up to Barbados to position itself to be able to rise like the proverbial phoenix from the ashes.

In recent years successive governments have borrowed and borrowed to respond to the lifestyle needs of consumers.

And so here we are.

 

Post General Election Musings

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Of concern to Barbadians everywhere is the ‘fatigue’ that has set in triggered by an economy stuck in the doldrums for  more than 10 years. Some Barbadians although tired of the persistent state of affairs seem to have expected Mia and the Barbados Labour Party (BLP) to flick a switch to quick fix the economic problems of the country.  Old news!

In the build to the 24 May 2018 there was chatter in the country about:

  • Austerity measures
  • Government printing 50 million dollars a month
  • Dwindling foreign reserves
  • A judiciary about to crash under its weight
  • Sewage spewing onto the street on the South Coast
  • Garbage pile up across Barbados and the under-resourced SSA
  • Poor public transportation and the under-resourced transport Board
  • Outstanding income tax rebates
  • Low domestic and international investment flows
  • Pothole ridden highways and byways
  • Poor maintenance (physical/environmental of buildings
  • Rapid fire borrowing from the NIS Fund by Central government and questionable lending to private entities
  • Unresolved CLICO mess
  • Twenty something credit rating downgrades
  • Public servants not having a wage hike since 2006
  • Poor financial state of SOEs (see Auditor General reports)
  • Dysfunctional working committees of parliament

The list is not meant to be exhaustive.

What the last decade should have taught us is that we have to find a way to build consensus to move the country to an improved footing. Persisting with the adversarial and fractious approach will not help. Unfortunately the last general election has left the Democratic Labour Party (DLP) a broken party and the so-called third parties have not stepped up to the task at hand (so far) as a credible alternative.

See blogmaster’s pulse chaeck notes in red to the above.

  • Austerity measures/no change
  • Government printing 50 million dollars a month/from all reports significantly reduced
  • Dwindling foreign reserves/stabilized as a result of default on loans and IMF and other injections
  • A judiciary about to crash under its weight/no change
  • Sewage spewing onto the street on the South Coast/immediate problem addressed until a permanent fix is implemented, so promised Abrahams
  • Garbage pile up across Barbados, landfills and the under-resourced SSA/moderate improvement
  • Poor public transportation and the under-resourced transport Board/no change
  • Outstanding income tax rebates/significant improvement
  • Low domestic and international investment flows/small improvement
  • Pothole ridden highways and byways/small improvement
  • Poor maintenance (physical/environmental of buildings)/no change
  • Rapid fire borrowing from the NIS Fund by Central government and questionable lending to private entities/significant improvement
  • Unresolved CLICO mess/no change
  • Twenty something credit rating downgrades/moderate improvement
  • Public servants not having a wage hike since 2006/small improvment
  • Poor financial state of SOEs (see Auditor General reports)/no change
  • Dysfunctional working committees of parliament/No change

The blogmaster shares his  musings based on rumshop talk and observation. The thing about debate in a rumshop is participants hold strong views and know they have the answers to everything. The libation does not help!

Postscript: we need to hear more about government’s plan to address concerns about the NIS. It is our lifeline.

 

 

Governor Cleviston Haynes Delivers Q2′ 2018 Economic Review

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Text file (PDF): CLICK HERE

 

 

Why You Should Watch the Quarterly Economic Review

 

Created 30 Jul, 2018

Every quarter, the Central Bank of Barbados publishes its review of Barbados’ economic performance. The video review, delivered by the Governor, is livestreamed on the Bank’s website and YouTube channel, and also posted in its entirety – about 10 minutes – on its Facebook page. These reviews provide insight into how the economy is faring, so if you haven’t been watching them, you should be. Here’s when they take place and what you should be listening out for.

 

 

 

 

The review is usually released about a month after the end of the previous quarter and covers Barbados’ economic performance so far in the calendar year. This means that while the review at the end of the first quarter will look at January to March only, the one at the end of the second quarter will cover the first six months of the year, and the one at the end of the third quarter looks at the period January to September. The year’s first review, the one that is usually held in January, actually reports on Barbados’ economic performance for the entire previous year.

 

 

In the review, the Governor shares key statistics – indicators – that reveal the health of Barbados’ economy. He usually gives an update on economic growth – the increase in GDP (Gross Domestic Product), or put another way, in how much the value of the goods and services Barbados’ produces has increased by, relative to the same time the previous year – as well as on the debt to GDP ratio, which compares how much Barbados owes to the value of what it produces.

 

 

The Governor also speaks about the fiscal deficit – how much more the Government is spending

than it is earning (If the Government is earning more than it is spending, that would be called a fiscal surplus). The fiscal deficit is tracked through the fiscal year, so if the Governor mentions “an overall reduction in the fiscal deficit from the previous year”, he is not referring to the calendar year, but rather to the 12 months starting from April and ending at the end of March, since Barbados’ fiscal year is April 1 to March 31.

 

 

The quarterly review usually includes other important indicators such as unemployment, the level of international reserves, and the retail price index – how much prices have increased over the past 12 months – as well as an overview of how tourism, one of our biggest sectors, is performing. It typically ends with a forecast for how much the economy is projected to grow as well as the Central Bank’s prescription for what action is needed to strengthen it.

 

 

The Central Bank of Barbados’ quarterly economic review provides timely, credible information, and now that you know the areas that help to tell the story of Barbados’ economy, you can keep abreast of how it is performing and of how you can to help improve it.

The next Central Bank of Barbados quarterly economic review will be published Thursday, August 2, 2018 at 11:00 a.m. Watch it live on the Central Bank of Barbados’ website, www.centralbank.org.bb

 

 

The Adrian Loveridge Column – Anticipating the Impact of Additional Taxes on the Tourism Sector

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[Barbados Underground] It is now a full month since the new Government imposed the mandatory room levy that our cherished guests have been asked to pay. How effective has the additional tax collection been and will we ever know what sort of overall revenue has been successfully collected?

Or how many the yet unregistered accommodation providers have so far evaded their legal duty by failing to account for and deposit these payments to the Barbados Revenue Authority?

What enforcement mechanisms have already or are planned to be put in place by the administration and how will they deter more property owners collecting payment offshore and avoiding due taxes altogether?

Like many perhaps, we have been watching prices on several products, expecting at least to fall after the removal of the almost obscenely called National Social Responsibility Levy. YES! We understand there are existing stocks to sell, but not in a single occasion have we experienced any reduction so far. In fact with many items, 10 per cent or more has been added to previously paid costs in May and early June.

Our response has been largely to avoid buying at these inflated prices, especially if at this time, they are considered non-essential.

Many observers out there may be under the illusion that a substantial percentage of our cherished visitors will not shop around to find how they can obtain a similar product at a price they have paid in the past and at least attempt to maintain the standard of a previous holiday here.

In many ways holidays or vacations are no different to other commodities and it is inevitable that the majority, especially those in the lower budget range will shop around. Just study what is going on with the battle between Walmart and Amazon at the moment. The giant box retailer, Walmart is ‘investing’ millions of Dollars into prime-time television commercials to hopefully remind shoppers that they can go online, order and have products delivered to their door at no cost, from them as well.

Our tourism planners and policymakers should not forget this, if they wish to safeguard the envious and diverse airlift that has been built up over the last few years.

Our UK market is probably the most sensitive at the moment with the continued uncertainly of Brexit, the fall in the value of Sterling, higher that forecasted inflation and rising mortgage costs, all play into the amount of disposable income for holidays.

Compound this with a staggering (even if necessary) increase in the cost or travelling to, staying in and patronising our various tourism offerings and it’s almost a given that this market will be under severe pressure in the months to come.

We all have to look at creative ways to help mitigate the possible loss of arrival numbers and the potential effect that will have on any economic recovery.