Filtering Truth From Fact About The Performance Of The Barbados Economy

Governor of the Central Bank Dr. Delisle Worrell

The International Monetary Fund (IMF) recently released a statement on the Barbados economy which has caused some Barbadians to sigh with relief. Central Bank Governor Delisle Worrell was also also full of glad tiding in April when he forecast the economy to grow 2% during his Review of Barbados’ Economy for the First Three Months of 2011. Why is BU not as optimistic?

Is it not ironic suggesting growth for an economy which relies heavily on that of the United States? The US legislature is currently debating whether to raise its debt ceiling to 16 trillion dollars!   Following close behind the US is the UK government  who has committed to cut 600,000 government workers over a three year period. How can we be so confident about growth when the two main markets we rely on for inflows of tourist, foreign direct investment and remittances continue to struggle? What growth the US has managed to achieve in the last year is what the economists refer to as jobless growth.

Given the prevailing economic uncertainty one might have reasonably expected our intellectual cadre of professors at Cave Hill,  to have come to the assistance of ordinary Barbadians, and provide an unbiased and reasoned interventions to demystify the economic gobbledygook we are being fed. No such luck. Instead what we have had to ‘processed’ is an attack on the credibility of the information presented by the Central Bank of Barbados in its periodic updates  to the nation. The Central Bank of Barbados has always held the respect of both sides of the political spectrum in Barbados. This is our first recollection of any Governor of the Central Bank attracting the kind of attack delivered with the fierceness as we are witnessing from former Prime Minister and Leader of the Opposition Owen Arthur and former Central Banker, economist and Arthur’ s right hand man Clyde Mascoll. They have both vehemently dismissed the view posited by Governor Worrell that the economy has grown.

At the crux of the puzzle if you follow  BU’s layman interpretation:

If nominal GDP (gross domestic product (GDP) figure that has not been adjusted for inflation) fell in 2010, and if prices were rising it means that real economic growth also fell. Against the foregoing how is it Barbados can report economic growth? In January when the government reported 0.3% growth that was based on an estimate. To be honest BU has become irritated at the carving up of the statistics and analysis to obfuscate ordinary public. What about the intelligentsia on Cave Hill? Had a peek at the Barbados Economic Society blog to make sure we had not missed any elucidation on the mystery of Barbados’ economic performance in the first three months of 2011.

BU will leave it up to the economic gurus to bang each other on the heads about who is right or wrong about the numbers. Here is what we know. If there has been some manufactured easing of the global economic conditions then it stands to reason that Barbados will benefit from a few more tourists visiting the island, increase in FDI and remittance inflows because a few more people feel a little more confident. Does it mean however that our debt to GDP ratio does not remain North of 100? Does it not mean that we are spending more than we are earning on Current Account? Does it not mean that we are flogging the same economic fundamentals which have served us well for the last 30-40 years? What is the status of our renewable energy program? On a related note it is ironic that President Barack ‘Clean Energy’ Obama gave the approval last week to ‘drill baby drill’ in Alaska and the Gulf.

There are facts and then there is the truth. To sensible Barbadians the truth is how long we can continue to withstand the boom and bust cycles which are approaching of late with increasing frequency. Wholly dependent on a fossil based economy in times when cheap oil is a thing of the past. We are given to understand we are at the tail end of the last recession described as the worst since the Great Depression. It has destroyed the wealth of developed nations and heaped more debt on developing nations. Developing nations have no choice but to turn cap in hand to the IMF, World Bank, IADB and other international financial institutions; all controlled by the developed world.

While our economists argue about whether we have nominal or 2% growth, it seems to pale in insignificance when we view the big picture.

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126 responses to “Filtering Truth From Fact About The Performance Of The Barbados Economy

  1. Josquin Desprez

    @ Bajan Truth

    The reality of the situation is that all countries are faced with the problems arising from the necessity of using scarce resources to satisfy all the wants of their citizens. Because we cannot produce everything we would like to consume, some mechanism must exist by which we would decide what will be done and what will be left undone. If we choose more of one thing, where there is an effective choice, it will be necessary for us to have less of something else. Because of scarcity, opportunity cost exists; people must make choices, and each choice incurs a cost (sacrifice). This means that each decision has a sacrifice in terms of its alternative not chosen. Scarcity limits an economy to points on or below its production possibilities curve.

    Land is a scarce resource and there is not enough of it available to satisfy the types of developments you are alluding to. Based on the theory of opportunity cost, if we use the available land for real estate projects, then we have to sacrifice agriculture. If we use the land to house every last person, then we have to sacrifice agriculture and the real estate projects.

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  2. @DAvid

    Let me start with the premis that i accept that performance measurement is not as hard as i say, tell this blog how it can be done, including the metodology that you would use to measure output and performance, citing examples in the caribbean where it is being done right now or futher afileld.

    I wait your informative response.

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  3. @observer

    Why do you want to benchmark against Caribbean islands? Do you want to be a leader?

    There is a lot of research out there here some research done for the S. Africa space.

    http://eprints.ru.ac.za/293/1/QW_Williams_MBA.pdf

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  4. The problem this government will face shortly is after all the talk about growth the unions will be coming to the table with expectations, how will/should they respond?

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  5. @David
    Our cultures are different to others, that is why.

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  6. @David

    The Unions have always been, in most cases, responsible. The Unions are on record of saying that they are interested foremost in preservation of jobs and they want government that assurance in writing.

    If the country can afford an increase, albeit small, there is nothing wrong with that. I would prefer to see the persons at the bottom receiving a small increase even if it means freezing any increase for those at the top.

    Where private sector companies have done well, the workers should be given an increase, but that will be decided at the negotiation table.

    It is time for business owners to have an employee share participation scheme where workers can be offered shares for the foregoing of bonuses.

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  7. @David

    I clicked on the link provided and got a blank page.

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  8. To those who think this is a time to play politics…

    World Bank president: ‘One shock away from crisis

    Mr Zoellick said the world should not forget the lesson of the last financial crisis
    Continue reading the main story

    Global Economy

    US economic slowdown is confirmed

    OECD sees risk of ‘stagflation’

    Markets fear Greek default closer

    Japan economy back in recession

    The president of the World Bank has warned that the world is "one shock away from a full-blown crisis".

    Robert Zoellick cited rising food prices as the main threat to poor nations who risk "losing a generation".

    He was speaking in Washington at the end of the spring meetings of the World Bank and International Monetary Fund.

    Meanwhile, G20 finance chiefs, who also met in Washington, pledged financial support to help new governments in the Middle East and North Africa.

    Mr Zoellick said such support was vital.

    http://www.bbc.co.uk/news/business-13108166

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  9. Things can’t be all that bright if a bank (FCIB) decides to send home 32 nd this is after making millions in profit. Then again it is all about ROI for the shareholders.

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  10. @David

    You got that right. I dont use no ATM to help put people out of work. MNCs are only interested in the dollar, they have no committment to any country, what lille money I have with FCIB, i gone put it on the BPWCCUL.

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  11. @ David
    Did I not say BNB was sending home staff since last year?

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  12. David wrote, “Then again it is all about ROI for the shareholders..”

    In this modern capitalist environment it is all about profits.
    32 x $100,000 = $3.2mill per year in employee cost saved.

    Hopefully there will not be too many more layoffs.

    Hants theory. A laid off employee is also a lost “customer”.

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  13. @David

    FCIB is 100% owned by CIBC and CIBC have been sending people in Canada home for years. Yuh tink dat dey gwine let de subsidaries off scott free?

    Eliminating a few employees will have a robust impact on your bottom line, all those salaries and benefits which you don’t have to dish out. Banks are not in the business of standing still when it comes to profits, if the bottom line doesn’t reach the prescribed target look for heads to roll.

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  14. @David

    The reason why I am more cynical about the socail partnership, employers do as they like, while labour must bear the brunt. The Social Partnership should be dissolved.

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  15. Prodigal Son

    When all is said and done, to help close the huge deficit, the government is going to have to lay off especially in the light of the union demands. Or the unions may just opt for no increases and hope for no layoffs.

    I see that the Minister of Finance is finally acknowledging that there is a problem and that they just cannot go along monthly using up NIS funds. He says that they are going to have to look at subventions. Yet they are still advertising free summer camps and stop this cradle to grave freeness mentality of some Bajans.

    My advice, though I know Dems dont need advice from anybody, they know it all, is that they look again at their budgets and go through line by line and cut down on some of of the unnecessary “freeness”, in that way the monies cut from the Drug Service can be reallocated back and stop old people from complaining daily that the government dont care about them.

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  16. I have never supported the excessibe expenditure on the summer camps. parents should provide meals for their children.

    There is still too much wastage in government, such as replacing sturdy office furniture that only need a little touching up, with expensive imported chip wood furniture.

    Shouldnt we be providing jobs for barbadians by using local furniture.

    Instead of using networking priniting, expensive ink is used for individual printers.

    Officers need to to get the best price for goods or services provided to government. There need to be an interal audit department in every Ministry/Department and Satutory Body.

    Teleconferencing should be used to reduce the cost of international travel. Ministers should be travelling business class in these recessionay times.

    The management information systems need to be improved. every person caught stealing govrnment funds should be prosecuted.

    More streamling need to be done, similarly to what was done in the Ministy of Health.

    Subventions given to NGOs should be tied to defined and measuarble outputs. Similary to Satutory Boards.

    Each consultant at the QEH need to deliver for the great compensation they are given.

    All Monies owed to Vat should be collected. It is a Comsumer Tax paid by the consumer.

    A vigorus programme need to be in palce to collect NIS, Payee and or corporation tax from the self employed.

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  17. Moneybrain

    @Sargeant
    While it is true that CIBC in Canada has fired peeps before, it should be noted that banks here have had a policy for years now to decrease full time employees and increase part timers. WHY?
    Banks dont want the cost of BENEFITS and PENSIONS!

    Banks in BIM make alot of money by taking advantage of peoples limited investment options, they hold overseas drafts for 30-45 days routinely etc. Banks should avoid firing good workers in keeping with what should amount to a social contract with the citizens of Bdos based on profits and accepted business practice on the island.

    What is noteworthy is that one of the Big Four Accounting Firms here in Toronto fired a bunch of good youngsters in 2008-09, including my own son who had been promoted to senior auditor 2 months bfore and who was let go days before his CA finals results, which he passed easily. Why? What kind of management and long term planning is that? These jokers did not even have the good sense to offer these youngsters a job at reduced pay!

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  18. Exactly how much of GDP in Barbados is deficit spending? 2% , 5% , 8%? I hope this government is not in a pretend, spend and extend programme. Like many other reckless nations, piling on more debt. No matter how many times the Keynesians fail, they always return to leadership and government, like undead zombies and vampires. Borrowing money to pay public workers salaries can only work for so long (subject for a much longer comment). To those of you still drinking the Kool-aid , believing that this is just a worse or bigger global recession…you’re dead wrong. The Global Ponzi is bust and no amount of deficit spending or bailouts is going to stop the coming depression….might delay it but not stop…Until then we get stagflation!!!! yippee (sarcasm)

    @Josquin Desprez

    I agree the Keynesian approach cannot solve our problems. Problem is many Keynesians think the Great Depression was solved with Government spending in the USA but until the retooling and expansion of the manufacturing base for WWII (early1940s) that prime the pump approach failed. It resulted in an entire decade of failure. Closer to our times Keynesian B.S failed again, in Japan and gave them a lost decade (1990s)…..wanna have a lost decade? subscribe to Keynesian B.S

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  19. Straight talk

    Let’s think outside the box a bit.

    We need Forex to sustain our chosen lifestyle.
    We don’t want to sell our “birthright” to foreigners.
    Our long stay tourists , if not decreasing, are spending less.
    The air travel situation is precarious and is being gradually legislated out of affordability by forces beyond our control.

    What to do?

    IMHO attract the well-heeled pensioners, of which there are thousands, to lease a lifetime property in specially developed communities (say, Sam Lord’s).

    This proposal converts visitors from long stay into permanent stay.
    Their considerable pensions are remitted here month after month, to pay living expenses, residency and land tax obligations
    There is minimal risk of damage to our culture or adding to criminal behaviour
    The medical facilities required will benefit all.

    I could go on, but you get my drift.

    Barbados still has an enviable cachet in our traditional markets, and could atract thousands with a well planned scheme, which would underpin our forex requirements without the need for chasing fewer and fewer tourists.

    Just a thought, bring on the comments.

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  20. @ST

    Agree and your suggestion has been mooted for moons now.

    If we understand correctly we need to have the ancillary services in place, private hospitals, friendly legislative framework, a willing public sector partner etc.

    In other words the same approach we have for traditional tourism.

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  21. Is Barbados real estate over valued ?

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  22. looking glass is entitled to his views; but the proof of the pudding is in the eating and owen arthur did what he was supposed to do during his fourteen years in office and he did it well. he took a bewidered country with a battered economy and allowed me and barbadians generally to enjoy a peaceful and prosperous life for the last fourteen years. no layoffs, no rejection of the barbados dollar by our caricom neighbours, no loss of severance, restoration of the 8%cut which would have enhanced the pension of public servants; giving unestablished workers pensionable status; expansion of the airport and seaport; expansion of the highway; reverse tax credits for persons in the lower income bracketand i could go on and on. i am sorry to have to sing the tune of the blp but there must be balance in our presentations. he lost the elections due to some splendid electioneering by the dlp buttressed by the eloquence of the late prime minister in questioning the integrity of mr arthur. we were promised better. the question to the non-partisan is are we better off? speculation is rife as to whether he would have been able to manage the economy as well under the current economic climate. i am of the view that having done it before ; he could have done it again and even better because he had the track record. the charges of corruption and the blp led against mr artur on the platform and which propelled the dlp to victory should be brought to light and let the chips fall where they must. i think that mr arthur’s greatest disservice to the people of barbados would be the destruction he has wrought on a party which lifted him from the bottom of the pork barrel; but in my view he did manage barbados well.

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  23. @Straightalk and david
    That idea could be fleshed out further with focus on Medical services to the retired and Medical Tourism. Medicine would bring in alot of $$$$$ quickly if organised properly. Bim being small must always think in terms of maximum profit / sq ft utilised.

    @Balance
    Owen was good in many ways but never forget that Bim and most Western Countries benefitted from the RIDICULOUS EXPLOSION in money creation. That is why we are in the midst of a very serious financial CRUNCH which will take at least 5-7 yrs longer. Be very careful as the US$ could be headed MUCH LOWER and hyper-inflation could easily wreak havoc a la Germany in the 1920s, Brazil/ Argentina in the 1970-80s and Zimbabwe more recently. Indeed I possess a Zim ONE HUNDRED TRILLION $ Banknote, very legit.
    Protect yourself with Gold/ Silver ie real money or other items that can hold value like agri commodities etc

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  24. @Moneybrain

    Banks in BIM make alot of money by taking advantage of peoples limited investment options, they hold overseas drafts for 30-45 days routinely etc. Banks should avoid firing good workers in keeping with what should amount to a social contract with the citizens of Bdos based on profits and accepted business practice on the island.
    ************
    Banks do hold funds on drafts even when they are issued by their own overseas branches for an inordinately long time. I know someone who has a fairly substantial balance in their account and the banks still hold funds for 30 days etc. although their balance far exceeds the value of the draft. In this day of modern communications there are many avenues that the branch could explore to verify the authenticity of the instrument. In some ways banking in Barbados is stuck in the 60’s.

    I agree with your comment re the social contract but you must remember that the Big 3 Scotia,RBC & FCIB have their HQ’s in Canada although regional HQs may be in B’dos. Policy directives are issued by HQ to mirror what happens in Toronto and local conditions may not be taken into consideration when it comes to layoffs. In Toronto a laid off bank worker could reinvent himself and perform many different roles while opportunities in B’dos are somewhat limited.

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  25. To be fair to the Financial Institutions I should have pointed out that some of the workers who lose their jobs are older workers who accept “retirement packages” and the younger members of the workforce get to keep their jobs

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