Economy on lips of many
As 2017 draws to a close, one cannot help but reflect on the year that was and all it had to offer.
Today we continue with our year in review series focusing on The Economy – The Issue of the Year. There is one major reason Barbadians will be eager to see the back of 2017.
The last 12 months have been extremely challenging economically.
Ordinarily, discussions about gross domestic product, fiscal deficits, mounting debt, and falling international reserves do not interest the average citizen.
This year was different. Bajans felt the economy’s stagnation in their pockets via increased taxation, higher prices, and overall reduced spending power. It therefore had their full attention.
In January, Central Bank Governor Dr Delisle Worrell reported that the economy grew by 1.6 per cent in 2016. He also said the outlook for economic growth in 2017 was “encouraging”. Tourism and construction led the way.
No one could have predicted what would happen next. Worrell was fired by Minister of Finance Chris Sinckler the next month, reportedly after being at loggerheads with members of the bank’s board. His attempt to save his job in court failed.
Worrell’s former deputy Cleviston Haynes replaced him on an acting basis soon after. Shifting from his predecessor’s policies, Haynes immediately restarted Central Bank quarterly press conferences following a three-year hiatus. He said Government could no longer depend on the bank to create money for its use. He placed more of the burden on commercial banks,
Cleviston Haynes: Acting Central Bank Governor. (FP)
compelling them to buy more Government paper.
Unfortunately for Barbados, the island suffered another credit rating downgrade soon after Haynes took office. Moody’s Investors Service issued the downgrade. Six months later, Standard & Poor’s followed suit, the overall 20th credit rating downgrade Barbados suffered in the last nine years.
Unknown to Bajans, Haynes’ policy changes and the first credit rating downgrade foreshadowed the bitter medicine that was to come. Nothing left as bad a taste in the mouth of the population more than the controversial National Social Responsibility Levy (NSRL).
Sinckler delivered his Budget at the end of May. Continuing his preference for revenue-raising measures over spending cuts, the minister announced an increase in the NSRL from two per cent to ten per cent. On top of that, and with concerns about dwindling foreign reserves intensifying, he also introduced a two per cent fee on all foreign exchange transactions, and increased the excise tax on fuel.
The impact of the Budget would be felt from then until the end of the year for more than one reason. It included the proposed sale of the state-owned Barbados National Terminal Company Limited (BNTCL) and Hilton Barbados hotel. Both were key to shoring up the foreign reserves.
The Fair Trading Commission said no to the BNTCL sale as applied for, saying it would be competitive. There were also concerns about the sale of the Hilton, reportedly for a price below what Sinckler initially announced and at the risk of a financial loss to the National Insurance Scheme.
If the increased austerity and concerns about foreign reserves left Barbadians worried, the NSRL in particular left the private sector and trade union movement fuming. So much so that labour and capital staged a protest march through Bridgetown. In the end, there was no roll back of NSRL. The lone concession was a removal of the imposition from a basket of consumer items.
Amid all of this, trade unions agitated for a pay increase for public sector workers, their first in about eight years. Government resisted such an increase and the Central Bank said the economy could not bear it.
Throughout the year, there was no shortage of advice for the Freundel Stuart administration on how to fix its finances and the economy. The message from local economists and institutions such as the Caribbean Development Bank, Inter-american Development Bank, International Monetary Fund (IMF), Economic Commission for Latin America and the Caribbean was that Government needed to do more.
After his firing, Worrell also continued to give his own advice. It Continued on next page.