IMF concludes 2017 consultation with Caribbean nation
On January 26, the executive board of the International Monetary Fund (IMF) concluded the Article IV consultation with Barbados.
Following the economic recovery in 2016, gross domestic product (GDP) growth is slowing reflecting increased pace of fiscal consolidation. Real growth reached 1.6 per cent in 2016 as a result of continued robust long-stay tourism arrival and spending. It is projected to slow to 0.9 percent in 2017 and 0.5 percent in 2018 due to the ongoing fiscal adjustment and policy uncertainty related to the forthcoming elections. Inflation is projected to rise by year end to 5.5 per cent as a result of recent tax increases but return to its historical norm in the medium term.
The current account balance continues to narrow but international reserves are falling. The current account deficit declined to 4.4 per cent of GDP in 2016, about of half that in 2014, due to lower energy prices and a recovery in export earnings. Notwithstanding, Net Inter-national Reserves continued to decline with lower official and private capital inflows, to about US$275 million at end-September (1.6 months of imports). The current account deficit is projected to continue to narrow to 3.7 per cent in 2017, and to 2.9 per cent of GDP in 2018 as a result of lower imports, but continued weakness in the financial account and delayed privatisation will contribute to weak reserves.