The Barbados Central Bank has released its Economic Performance Review for 2022.
Here are some of the headline figures:
Macroeconomic conditions remained challenging during 2022 as the international economic environment tightened in the aftermath of spiralling global inflation. However, Barbados’ economy registered a robust recovery from the COVID-19-induced decline over 2020-2021.
The rejuvenated performance was led by the tourism sector, as the relaxation of COVID-19 restrictions on travel, recreation and business operations enabled a full reopening of the economy. Preliminary estimates are that economic output rebounded by 10.0 percent, generating a U-shaped recovery path. With the strong upturn, the labour market was marked by fewer unemployment claims, increased participation rates and a reduction in unemployment.
The impact of the Russia-Ukraine conflict on food prices, higher international energy prices, and on- going supply chain disruptions, raised domestic inflation as rising import prices filtered into the economy. Foreign inflationary pressures eased in the second half of the year, and with Government’s policy intervention on energy prices and its compact with the private sector on mark-ups on basic food items, the pace of price increases slowed. At November, prices were reported to be 8.5 percent higher than for the corresponding period 12 months earlier.
The strong economic recovery, together with the sharp spike in imported inflation, raised imports and counteracted the gains in foreign exchange earnings arising from the revived tourism activity and the increased contribution of the international business sector. As a result, with the increase in imports and Government borrowing substantially less from international financial institutions than over the past two years, the import cover of international reserves fell.
In addition, the increase in international interest rates to combat inflation reduced the market valuation of the securities portfolio by approximately two weeks of import cover. However, the reserve buffers remained more than twice the twelve-week benchmark.
The economic upturn, together with the favourable effects of the inflation dividend on transaction- based tax revenue, enabled Government to achieve an improved fiscal performance. Interest costs rose, partly because of higher interest rates, including on the domestic restructured securities. However, non- interest expenditure was largely unchanged as lower transfers to public institutions and reduced capital spending almost offset rising costs on goods and services. With this performance, Government remained on track to achieve a primary surplus of at least 2 percent of GDP for FY 2022-2023, following deficits in each of the two preceding years.
With the strong economic recovery and the strengthening of the fiscal performance, the debt-to-GDP ratio fell to 124 percent of GDP. The commencement of redemption of restructured interest-bearing debt started, but newly recorded historical arrears and the issuance of new domestic bonds added to the debt stock.
The improved fiscal performance helped to slow deposit growth and the build-up of excess liquidity in the financial system. The monetary base, comprising commercial banks’ deposits with the Central Bank and currency in circulation, slowed to just over six percent, compared to double-digit increases in each of three preceding years. The Central Bank left its policy rate unchanged and domestic interest rates at financial institutions remained at historic lows. New lending for corporates and households trended upwards and there was an overall increase in credit to the non-financial private sector, the strongest growth since 2017.
Read the press release in full, released by the Barbados Central Bank and watch the Central Bank Governor Cleviston Haynes deliver the review: