Construction, tourism to lead Barbados recovery
Amidst global pressures from the Russia-Ukraine conflict dimming the outlook on growth, the Central Bank of Barbados (CBB) is buoyant that the country’s economy will rebound to double-digit growth in gross domestic product (GDP) driven by an improvement in tourism and construction projects set for roll-out by the Government.
The International Monetary Fund (IMF) has projected 2.5 per cent growth in GDP in Latin America and the Caribbean as the conflict in Eastern Europe exacerbates pre-existing inflationary pressures from the novel coronavirus pandemic and supply chain challenges, and prompting central banks worldwide to adopt tightening monetary policy. In fact, the IMF notes that the war in Eastern Europe with its associated sanctions on Russian exports is the second most important factor in its revision of growth rates.
Added to this, the CBB in its quarterly economic review for January – March 2022 notes that “pockets of high new daily cases occurring in major markets such as the United Kingdom, South Korea, China and Australia remind us that we must continue to be vigilant, given the risk that COVID might stall the global recovery.”
But while the central bank acknowledges that external developments play a role in shaping its outlook, it is confident that the Barbadian economy is on a path to double-digit recovery, “premised on the sustained revival of tourism and the acceleration of activity in the construction sector”. In addition, it said that the rebound in agriculture and continued investment in renewable energy were also key indicators of growth for 2022.
Still, the CBB in its review warned that the poorer than expected global recovery, delays in construction projects and prolonged supply chain disruptions are a threat to the island’s economic recovery.
It outlined further: “The sharp rise in international commodity prices has already impacted the cost of living and further acceleration could stall domestic demand. Commodity prices are forecast to increase further during the year but oil prices are expected to stabilise at elevated levels. To temper the effects of these prices and dampen the inflationary pressures, Government introduced select measures to contain the increase in the cost of living in its recent Budgetary Proposals and Financial Statement.”
Coming out of the final quarter in 2021, the Barbadian economy continued on its path of recovery to pre-COVID levels into the first quarter of 2022, with preliminary data showing growth of 11.8 per cent.
“The recovery was driven by the vibrant revival of the tourism sector which helped to bolster private sector spending. In addition, there were also encouraging signs of an upturn in the production of goods for export markets,” the CBB noted.
The central bank explained that pent-up demand for travel in the previous year contributed to Barbados recording its highest level of long-stay arrivals since the pandemic, with improved airlift supporting the recovery in the tourism sector.
As key tourism markets contained the spread of COVID-19 and as a consequence lifted travel restrictions, the United Kingdom took the lead in arrivals, accounting for more than half the visitors to Barbados and reaching 75 per cent of 2019 levels.
At the same time, construction activities contributed significantly to a 3.5 per cent expansion in non-traded sector activity.
“The improved performance of the construction sector reflected the normalisation of activity from the national pause in early 2021 and the continuation of major projects, such as the Wyndham hotel and the Sagicor Retirement Village. This activity was supplemented by tourism-related developments along the south coast of the island and residential building activity. The gains in the service sectors were attributable to the cessation of curfews and the impact on the ancillary sectors from the improvement in tourism,” the CBB pointed out.
Ahead of national polls back in January, the Mia Mottley-led Barbados Labour Party, which won the 2022 General Election, highlighted in its manifesto a pipeline of infrastructure projects totalling BD$1.4 billion that included both private and public sector investments.
Among the Government-led projects were the Speightstown and Constitution River Hood mitigation and beautification and National Road Rehabilitation programme valued at BD$20.4 million and 22.8 million, respectively. Meanwhile, private sector projects included expansion of The Crane Resort, construction of a commercial centre and cineplex at Welches in St Thomas, and Porters Townhouse Development.
In terms of renewable energy investment, the manifesto also noted the smart energy programme worth BD$12.1 million, which involved installing solar electrical systems on all government buildings.
The BLP indicated that projects would result in the employment of 5,000 construction workers in the various development phases and 3,600 full-time employment thereafter.
Also in the first quarter, the manufacturing sector expanded output by 5.4 per cent due to improvements in domestic demand created by the relaxation of COVID-19 health protocols, tourism demand for locally produced beverages, and the partial recovery of exports.
“Food and beverages provided the greatest impetus, but there was also strong growth in construction materials, particularly for cement for the recovering construction sector,” the CBB stated.