BRIDGETOWN, Barbados, CMC – The Barbados economy grew by 2.1 per cent during the first six months of the year and is on course to achieve “modest growth” in the region of 2.1 per cent this year, the Central Bank of Barbados (CBB) said Tuesday.
In a review of the local economy, the CBB said that after two years of decline, winter tourism rebounded and the sector grew by 5.5 per cent during the first half of the year.
It said the growth in non-tradables had been slower, with increases in whole sale and retail estimated at two per cent while the construction industry grew by 3.8 per cent.
But even as the island welcomed the increase in winter tourism, the CBB said that there had been no build up in foreign exchange reserves as tourists spent less while vacationing on the island.
“Nonetheless reserves remain more than adequate at the equivalent of 20 weeks of import. Business profitability has not recovered and corporation tax receipts fell short of expectations.
“This made it difficult for government to meet financial targets in spite of the increase in the VAT (Value Added Tax) rate and restraint on discretional spending,” the Central Bank said.
It said that the real growth in Gross Domestic Product (GPD) in the first half of the year is estimated at 2.1 per cent.
According to the CBB, the United Kingdom market continues to be a bright spot in the tourism recovery with arrivals to May posting a 14 per cent increase over the same period a year ago.
Arrivals from Caribbean destinations grew by about two per cent to May and the CBB said that this was due to several sporting events including the West Indies Cricket Board’s One-Day international series and the CARIFTA Swimming Championships.
The sugar harvest this year was adversely affected by excess rainfall and the CBB said that as a result, earnings from the sector are expected to be slightly below the amount received in 2010. It said that total manufacturing output fell by approximately six per cent in the first quarter of 2011.
“It is estimated that tourism receipts contributed approximately 50 per cent of foreign exchange earnings for January to June compared to 52.1 per cent in a similar period last year. The share of domestic exports is estimated to be around 14 per cent of foreign earnings, compared to the 11 per cent recorded in 2010,” the CBB added.
It said that high international oil and commodity prices contributed to a widening of the current account deficit and that net capital inflows for the first half of the year were estimated at BDS$319 million (US$159.8 million) of which the major inflows included the shares in Barbados light and Power Company, financing to tourism and private projects and real estate flows.
Provisional estimates indicate that during the first quarter of 2011, the level of employment declined from 10.5 to 10 per cent at the end of December 2010.
The CBB said that the economy remains on course to achieve modest growth in the region of 2.2 per cent this year, provided there is no slowdown in the tourism sector.
“The construction sector could also see further measured expansion with some contribution from foreign inflows, mainly to finance tourism related projects,” the CBB added.
“As a result growth of these two sectors which make a major contribution to employment, the rate of unemployment is expected to continue to ease.
“There are no inflationary pressures from domestic demand, but inflation is expectations are very uncertain, because of the unpredictability of import prices, especially for petroleum, “the Central Bank said.
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