The International Monetary Fund (IMF) says following the “severe impact” of the global economic crisis on Barbados, the island’s economy is beginning to recover.
Therese Turner-Jones, chief of an IMF mission that visited Barbados from May 10-13, said that growth has “started to pick up” in early 2011.
She said in a statement issued in Washington that real Gross Domestic Product (GDP) is projected to grow by about 2 percent this year, mainly due to higher tourist arrivals, “signaling the onset of a recovery from the slow growth in 2010 and the two earlier years of negative growth.”
“Notwithstanding downside risks, including from the uncertain global environment and concerns about inflationary pressures due to higher world food and fuel prices, the team expects growth to continue on a steady path, supported by a recovery of tourism and financial services activity,” Turner-Jones said.
She said discussions with Barbadian authorities centered on strategies to maintain fiscal and debt sustainability “by putting the debt on a declining path over the medium term.
“Fiscal consolidation remains the top priority, consistent with the authorities’ commitment to the implementation of the medium-term fiscal framework,” she said.
Turner-Jones said the mission welcomed the measures adopted in late 2010 to strengthen revenues, including the temporary increase in the Value Added Tax (VAT) rate, and supported ongoing efforts to improve the fiscal out-turn, “which remain challenging given the still vulnerable economy.”
The mission noted that strengthening the fiscal stance would also underpin external sector stability and strengthen reserves, “which is crucial given high oil prices and the uncertain global outlook.
“While the banking system remains liquid and well capitalized, continued vigilance is warranted, as the improvement of financial sector indicators is likely to lag the recovery,” the statement said.
“The launch of the Financial Services Commission, which will bring under one umbrella the supervision of insurance, credit unions, securities and international financial services, will strengthen the regulation and supervision of non-bank financial institutions,” it added.
The IMF mission also welcomed the appointment of a judicial manager for CLICO Life Insurance and expressed support for a “prompt resolution that minimizes fiscal contingent liabilities while emphasizing the need for a regional mechanism for coordination of crisis resolution in future events to ensure regional financial stability.
“The mission is especially grateful for the open communication and close collaboration enjoyed during this visit with government officials and other Barbadian stakeholders, with whom it had the privilege of exchanging views,” it said.
