TESTING TIMES

The COVID-19 pandemic has exposed the country’s vulnerability to severe economic shocks and it is testing our resilience.

Governor of the Central Bank of Barbados, Cleviston Haynes suggested the above yesterday, as he delivered the Central Bank of Barbados’s review of Barbados’ economic performance for the first six months of 2020 and gave an outlook for the remainder of the year.

“In my economic briefing for the first quarter of the year, I cautioned that the COVID-19 pandemic had so altered the global economic outlook, that the Barbados economy faced the prospect of a double-digit decline in economic activity, in 2020. During the April to June quarter, the impact of COVID-19 spread across the Barbadian economic landscape. The virtual cessation of activity in the tourism sector, combined with curfews and temporary closures, deepened the initial contraction that was realised during the first three months of the year. Preliminary data now suggests that economic output fell by 27 per cent in the second quarter, resulting in an overall decline of almost 15 per cent, over the first six months of 2020,” the Central Bank Governor said in his opening remarks.

He further noted that as tourism arrivals plummeted, the depth of the recessionary conditions underscored the importance of the tourism sector, highlighting its linkages to other sectors such as agriculture, distribution and transportation.

“Layoffs in the tourism and restaurant industries were therefore accompanied by additional job losses in other sectors, which experienced diminished cash flows. As a result, unemployment insurance claims between March and the end of June surged to in excess of over 33 000. Some private sector firms also temporarily reduced wage rates and hours workers, in an effort to cut operating costs and contain the overall impact on employment levels,” he added.

Acknowledging that Barbados has recently reopened its borders, he however noted that key source markets continue to be badly affected by the virus, which will have an effect on tourism.

“There is some pent-up demand for global travel, but the absence of a vaccine, the inability of some travellers to easily obtain tests for the virus and concerns about protocols when they do travel, represent significant downside risks to a rapid recovery in the tourism sector. In addition, reduced airlift from international markets, high airfares and uncertainty related to regional transportation links, will temper the pace of the revival of tourism activity,” he said.

“The reopening of borders will enable some businesses to restart their operations and re-engage employees currently relying on unemployment insurance. However, some additional job losses can be expected, as firms adapt to the reduced economic activity and uncertainty. We anticipate that some private sector investment projects may start during the second half of the year, complementing Government’ planned enhanced capital works programme. Implementation of these projects, along with a partial resumption of tourism related activity, is critical for slowing the economic decline experienced in recent months and for creating the foundation for recovery in 2021. However, these projects are unlikely to prevent a double-digit decline in output for the year,” Haynes maintained.

Stressing that revitalising economic activity is crucial to the well-being of the country, Haynes stressed that a speedy turn around however hinges on several factors, including the pace of the global economic recovery, our ability to safeguard the health of our firms during this period, our ability to implement reforms that enhance business facilitation and enable swift project execution. Also, our ability to attract and jump-start investment projects that will create jobs, boost economic activity and earn or save foreign exchange, remains critical to the recovery, Haynes suggested.