Barbados economy growing
Wednesday April 13 2011 | 01:37 AM

Barbados' economic stewards are smiling this evening. This comes with the good news from the Central Bank of Barbados that, buoyed by an "encouraging" winter tourist season, highlighted by "a significant rebound" in British and American tourist arrivals, the local economy grew by 2.8 per cent between January and March this year.

Other encouraging signs reported were an improved fiscal deficit, increasing foreign exchange reserves, declining unemployment, increased international business and financial services sector activity, reported Governor Dr. DeLisle Worrell, in the bank's first quarter 2011 review.

Based on the winter tourism turnaround the institution, once the summer seasons recovers "from the doldrums" and other indicators are in the country's favours, the expectations are that the economy could grow by two per cent this year. This, Worrell indicated, was even though spiralling oil prices had pushed up inflation and prices.

"The winter tourist season has been encouraging, with a significant rebound in tourist arrivals from the UK and the US. This was the main cause of the growth of real GDP in the first quarter, estimated at 2.8 per cent," the governor said.

"The stock of international reserves stood at $1,474 million at the end of March 2011, $20 million above that recorded at the end of 2010, and equivalent to approximately 20 weeks of imports of goods and services."

"However, as a result of soaring international oil and commodity prices, the average rate of inflation for the 12 months ending January 2011 increased to six per cent. The unemployment rate for the last quarter of 2010, which has now become available, was 10.5 per cent," he added.

The economist said marketing efforts and incentives directed to the United Kingdom market "appear to have paid dividends, and arrivals from the UK posted growth of 15 per cent".

Additionally, he noted the announcement of a temporary freeze in further increases in the UK's air passenger duty "removes a potential threat to recovery in this market". Arrivals from the United States market also grew, by seven percent, "aided by additional airlift capacity from the southern region", but arrivals from Canada fell slightly, largely because of competition from Mexico.

The Central Banker said the West Indies Cricket Board's T20 tournament "may have been instrumental in boosting regional arrivals in January, but relatively high airline prices have continued to hamper travel within the Caribbean".

"Arrivals from the region fell by 2.1 per cent in February. Cruise arrivals increased by an average of 1.5 per cent over January and February; however cruise has represented only 18 per cent of total tourist days for the year thus far1. Overall, travel receipts are estimated to have grown by $49 million, seven per cent more than the earnings received during the first three months of 2010," he noted.

Other good news was that "the number of active companies in the International Business and Financial Services Sector at the end of March 2011 was 2,411, a six per cent increase compared to March 2010".

"Private capital inflows were significantly higher than in the corresponding period of 2010. The main reason was the transfer of funds associated with the sale of shares in the Barbados Light and Power Co. Ltd. to Emera Inc.," Worrell said.

The improved tourism performance was so beneficial that receipts from that sector "contributed 60 per cent of foreign exchange inflows in the first quarter, with other services, mainly international business and financial services, contributing a further 12 per cent".

As for the future, Worrell said much relied on the performance of tourism. "Based on the apparent recovery in tourism in the winter season, the industry is expected to grow in real terms by in excess of three per cent in 2011, provided the summer season also recovers from the doldrums," he said.

"However, tax revenues from the international business and financial sector remain depressed. On the basis of these and other indicators, overall growth for 2011 of a little more than two per cent remains possible. Inflation is expected to continue to accelerate, under pressure of international oil and commodity prices."