BARBADOS’ economy is set to grow by up to 11.2 per cent this year, according to data from the International Monetary Fund (IMF), with a 4.9 per cent improvement following in 2023, and thereafter averaging 1.8 per cent increases up to 2027.

While the Central Bank of Barbados (CBB) anticipates that gross domestic product (GDP) could expand in the double digits, it is cautious that rising inflation could erode disposable income for consumption and warns that rising fuel costs could increase airfares, tempering the tourism recovery.

On Wednesday, April 27, the CBB released its economic review for January — March 2022, highlighting positive indicators — 4.2 per cent inflation and net international reserves of over US$3 billion. In addition, unemployment in Barbados fell from 12.4 per cent in the third quarter of 2021 to 10.9 per cent in the final quarter of the year.

“The positive signs of a robust economic recovery as witnessed during the last nine months of 2021 were sustained into the first quarter of the year. A re-emerging tourism sector helped to propel the growth momentum and to stabilise the labour market which registered a low level of jobless claims. However, despite the gains, activity is not yet at pre-COVID levels,” the central bank wrote.

“The uncertainty that pervades the world economy, as a result of ongoing health-related risks associated with the pandemic, supply chain disruptions, geopolitical events and monetary policy tightening in advanced economies, served as a poignant reminder of the challenges and vulnerability of the domestic economy,” it added.

CBB also highlighted that the the Russia-Ukraine war has also become a concern as continues to exacerbate pre-existing inflationary pressures occasioned by a surge in food and energy prices.

With both countries now constrained in their supply of commodities globally, the central bank believes the war, if prolonged, could slow the global economic recovery and have second-round effects on the local economy.

“Already domestic prices have risen in line with international price movements, prompting Government to introduce measures focused directly on containing some of the price increases,” the CBB said.

While Trinidad and Tobago-based economist Marla Dukharan points out that the novel coronavirus pandemic has cost BB$600 million in foregone revenues and BB$390 million in additional expenses, she adds that revenue measures announced in the budget should generate a primary surplus.

The central bank confirmed this observation in its review.

“Government’s revenue has recovered faster than expected, partly the result of the impact of rising prices. This enabled Government to maintain its targeted policy stance for FY 2021/22, while increasing its spending, including for rising health-care costs associated with the ongoing pandemic and for addressing the needs created by climatic events in 2021,” the CBB noted.

Although Barbados’ public debt has reached 136 per cent of GDP, the Government remains committed to attaining a 60 per cent debt-to-GDP target by FY2035/36, as per its IMF agreement.