Investment key driver of economic growth

While some gains have been made in putting the country’s economy on an upward path, president of the Barbados Economic Society (BES), Shane Lowe, says there is a lot of work still to be done.

As he spoke on the recent report of the International Monetary Fund (IMF) that “an excellent start” was made to the restructuring program, Lowe stressed that while there was slow progress, a number of areas still have to be tackled.

Outlining that consumption would not be a driver of economic growth, he instead pointed to the need for investment.

“Because of the ongoing austerity, that is not likely to ease up anytime soon, there is going to be a need for something else to drive growth, and consumption is probably not going to be the driver over the next four or five years. So that is where investment comes in,” he said, while addressing the Barbados Economic Forum at Sandals Royal recently.

Lowe stressed therefore that increasing the ease of doing business was critical to encourage investment and to “offset some of the negative effects of the ongoing fiscal consolidation”.

Highlighting the excess liquidity in the banking system was expected to continue, he suggested that this was an area that could be utilised.

“Return on assets for Barbadian banks or Barbadian-based banks, are actually the lowest in the Caribbean and that means naturally that banks will compete for your business, in a very aggressive way. What it means in a very aggressive way is that all of the excess liquidity out there will be put to work and rates will likely tend to be low. Now for a borrower, that’s great news, you can borrow at good rates and finance a lot of the domestic investment that we need. For a saver, not so good news, because what it likely means is that your savings accounts will continue to attract a very low rate in the medium term,” he argued. (JMB)

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