Barbados economy sputters
..but Central Bank Governor, Calvin Springer sees tourism and agriculture leading the turnaround

by Wayne Lewis
Bridgtown, Barbados

After taking a battering in 1990, 1991, and 1992 the Barbados economy, the most admired in the region for more than a decade, is sputtering as it tries to regaining strength. This opinion was conveyed last month by the Governor of the Central Bank of Barbados, Calvin Springer who announced in his review of 1995 that the real Gross Domestic Product (GDP) - the total goods and services produced by the country - grew by an estimated 2.3 percent when compared to 4 percent in 1994. Last year's growth in GDP was the third consecutive following an economic decline of 3.3 percent in 1990, 3.9 per cent in 1991 and 5.7 per cent in 1993.

Springer attributed the slowdown in overall GDP in 1994 to reduced sugar output which fell by 26 per cent due to the prolonged drought. There was also a below average performance in the tourism sector which continued into 1995. The tourism sector grew by 9.4 per cent in 1994 but only 1.1 per cent last year. But these were partially offset by the 6.7 percent increase in manufacturing output, the second year of growth in that sector following four successive years of decline. The Central Bank Governor is anticipating that for 1996 GDP should be around 4 per cent as the traded sectors, especially agriculture, is expected to provide the main "impetus" for growth. He also anticipates sugar production to increase by 35 per cent because of the better weather conditions in 1995, the higher acreage under cultivation and a more efficient replanting programme.

However, the Barbados Economics Society, an organization of economists from all strata of society, is a bit more conservative in its prediction of 3 percent for 1996. The Society, while agreeing that there will be a significant increase in sugar production, contends that this is nothing really to shout about since sugar now contributes less than two per cent to GDP, as opposed to the 14 per cent contribution of tourism.
"For Barbadians this all adds up to is an economy which is still feeling the effects of severe measures during the first three years of this decade as things nearly hit 'rock bottom.' Therefore one can understand the cautious nature of the Barbados Labour Party Government, which came to office on September 7, 1994, as it tries to keep its spending between 1 to 2 per cent of GDP annually. While some analysts contend that this is not enough for the economy to adequately grow, Prime Minister Owen Arthur, a trained economist has warned that the country is not yet out of the 'woods'. Surely he would remember the familiar rumblings that greeted the austerity measures of his predecessors the Democratic Labour Party when they tried to stem the decline in the economy in 1990, 91 and 92. As an example of its cautious nature Government recently legislated salaries for public workers which resulted in them receiving a 2.5 percent increase at the top and 3.5 per cent at the bottom in the first year followed by three percent across the board in the second year.

While one of the main unions - the Barbados Workers Union - agreed to the settlement, the National Union of Public Workers which represents mainly government workers was upset with the legislating of workers' wages and has referred the matter to the International Labour Organization. But there is good news for these public workers who might feel that after bearing the brunt of the austerity measures in the early 1990's, that they are being unfairly treated. Both the Central Bank Governor and the Barbados Economics Society estimates inflation for this year to remain at about 2 percent. One reason for this is the signing of the second prices and Incomes Protocol which runs until March 1997. This is an agreement between the social partners, primarily the private sector, Government and the unions. Through its tripartite approach to industrial relations during its first period of operation from April 1, 1993 to March 31, 1995 it has been a vital component of Barbados macroeconomic programme for the realization of sustained economic growth and development.

The Protocol has been credited with safeguarding the country's exchange rate, slowing the growth of inflation, restricting the demand for imports, encouraging dialogue among the social partners, and improving industrial relations. Generally speaking it has suppressed the growth in consumer prices and kept salary increases at a minimum. The high wages is believed to be a significant hindrance to the country competitiveness for outside investors. Given such innovation coupled with Government's caution it is hoped that the Barbadian economy reverts to the performance highs that it reached in the latter years of the 1980's.

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