BRIDGETOWN, Barbados (CMC) — The Central Bank of Barbados (CBB) Wednesday said the island will experience negative growth of 0.25 to 0.75 per cent this year while output next year is forecast to be in the range of 0.5 to one per cent.

In a review of the performance of the Barbados economy for the first nine months of the year, CBB Governor Cleviston Haynes said the actual outcome will be influenced by the speed with which new investments, particularly in the private sector, occur.

“These have the potential to absorb some of the labour that Government is shedding. In addition, the 2019 English cricket tour is anticipated to boost activity at the same time as the emerging medical education sector gains root.”

Haynes said that increased airlift out of the United States creates the potential for a strong uptick in activity.

“Given the elimination of the NSRL (National Social Responsibility Levy), the inflation rate is expected to fall. The current forecast for inflation for 2018 and 2019 is now 4.3 per cent and 2.7 per cent, respectively.

“However, volatile oil prices remain a threat to the trajectory of the inflation rate. This positive outlook requires the effort and commitment of all stakeholders to ensure that the reforms achieve their intended goals,” Haynes warned.

The CBB said that the outlook for the local economy is for a sustained recovery and a strengthening of performance indicators over the medium term.

However, it said that actual outcomes will be influenced by the new Government’s success in implementing the programme that it has agreed with the International Monetary Fund (IMF).

Barbados has entered into a US$290 million Extended Fund Facility (EFF) with the Washington-based financial institution, which the Mia Mottley Administration said is necessary to help in the revitalisation of the economy.

“In this regard, meeting the targets under the programme criteria will unlock additional foreign inflows from the IMF and our multilateral partners and facilitate a further build-up of reserves,” the CBB said, noting that the programme targets a gradual improvement in the import reserve cover from 6.5 weeks at mid-2018 to more than 16 weeks by 2022.

“However, the anticipated early receipt of funds and the stronger than expected build-up during the third quarter of the year should enable a somewhat faster accumulation of reserves than originally thought.

“Accelerated accumulation of reserves is desirable at this time given the economy’s vulnerability to external economic and climatic shocks, and the impact that such holdings have on confidence in the economy.”

The central bank said that Government’s fiscal consolidation is central to maintaining the adjustment effort. It said the government is making progress towards achieving the targeted primary surplus of 3.3 per cent for the current fiscal year.

“However, any delays in the implementation of new tax measures and in expenditure reduction, particularly for State-owned enterprises, will need to be monitored carefully. The targeted primary surplus of six per cent from financial year 2019/20 represents a major consolidation effort.”

The CBB notes that with the exception of the Jamaican economy, which achieved an average primary surplus of over seven per cent over the past three years, other Caribbean economies averaged primary surpluses of less than one per cent in fiscal 2017.

It said the strong adjustment for Barbados is required because of the need to reduce the heavy indebtedness, to create fiscal space and reduce reliance on central bank financing.