Barbados guide 2016: ECR data
Strong and steady: The latest rankings from Euromoney Country Risk underline the strength of Barbados’ economic revival.
The latest Euromoney Country Risk (ECR) rankings, published in June 2016 by Euromoney, demonstrate the strength and stability of Barbados’ economy.
We start with the country’s overall ECR ranking, which comprises four metrics, each of which is debated by a pool of respected global economists and financial-sector leaders. Barbados places highly, with a score of 42.58 in the latest survey, up more than two points on the same time a year ago. That ranks the island nation third across the region, behind two larger economies, Bahamas and Trinidad & Tobago. (The latter’s total economic output in 2014 was $43.4 billion, nearly ten times that of Barbados.)
Or look at the current state of the Barbadian economy. This has always been a great place to do business: the main challenge, in the years after the global financial crisis, lay in the relative weakness of big Western economies such as the US and the UK, Barbados’ biggest economic partners.
Take the overall ECR economic risk rankings, where the lower the number, the more stable and robust the economy. Barbados’ risk weighting has declined every quarter for the past three years, falling to 136 in June 2016. The economic outlook metric, where higher numbers are better, is also improving fast, hitting 3.2 in June 2016, the best score in three years.
That should come as no surprise. Income from tourism totalled $888 million in the first half of 2016, up from $809 million the year before, according to data from the central bank of Barbados. That figure was aided by a sharp rise in inward arrivals in the key winter season. Nominal GDP expanded over 3% year on year in the first half of 2016. And the IMF tips the economy to grow by 2.1% on an annualized basis in the full year 2016, the fastest rate of expansion in nine years. Ratings agency Standard & Poor’s expects GDP to expand from $4.4 billion in 2014 to $5.1 billion in 2018.
Barbados’ monetary policy and currency stability ranking is also on the rise, according to ECR data, hitting 4.8 in June 2016, up from a low of 3.9 two years ago. The country’s banking stability score has improved steadily since June 2014, underlining the trust invested in the country by the public and private sectors, and the wider business community.
According to recent ECR data, the country’s political risk outlook score was 16.94 at the end of the second quarter of 2016, steady since the start of the year.
To anyone who does business with, lives in, or travels regularly to Barbados, this should come as little surprise. In a September 2015 report, S&P noted that Barbados boasted a “stable, predictable, and mature political system, which has traditionally benefited from consensus on major economic and social issues”. According to Dustin Delany, managing partner at Delany Finisterre, a Bridgetown-based international law firm, “stability across the board – economic, political, and societal – as well as the country’s mature business infrastructure” is one of three overwhelming reasons to invest in Barbados, along with transparency and the ease of doing business.
Look into the guts of the country and you also see that its strengths run deep. Its employment ranking, again using ECR data, has risen consistently over the past few quarters, in lockstep with the rapidly improving economy. Following an official trip to the island in May 2016, Judith Gold, deputy division chief at the IMF, applauded the fact that the employment rate had increased by two percentage points in 2015.
Barbados boasts the lowest corruption score in the Caribbean, according to ECR data from June 2016, and boasts the best regional soft and hard infrastructure rating. That underlines the state of its financial services infrastructure – there are more ATMs per head of population than anywhere else in the Caribbean – as well as its first-class education and healthcare system, and a mobile telecoms system based on a high-speed fibre-optic network. Jeremy Stephen, president of the Barbados Economic Society, says one of the island’s greatest attributes is “the ease with which citizens and tourists can navigate the island”.
Barbados also boasts a young, aspirational populace, as well as a labour relations system based on stability and consensus. That is testament to the country’s leaders past and present – people such as central bank of Barbados governor DeLisle Worrell and minister of finance and economic affairs Christopher Sinckler.
In purely financial terms, the country is doing as well as it has in years. The ability of local and international corporates and institutions to access capital rose from 3.5 in the December 2015 ECR rankings to 4.75 in June 2016. Barbados’ government finances, after wobbling a little in the years immediately after the global financial crisis, have improved over recent quarters.
The country’s foreign currency reserves fell by $43 million to $884 million over the course of the first six months of 2016, hit by delays to tourism investment projects and higher external debt requirements. But the central bank expects that number to tick up again in the second half, reaching $938 million by end-2016. The fiscal deficit, meanwhile, widened slightly to $204 million in the three months to end-June 2016, according to data from the central bank, as a result of lower revenues from personal income tax and sales taxes.
In his 2015/16 budget, finance minister Sinckler announced his intention to boost the annual rate of growth of economic output to between 2.5% and 3% in the medium term, and to cut the fiscal deficit to no greater than the rate of GDP growth by 2017. A longer-term ambition is to balance the budget by 2020. In his January-July 2016 Review of the Economy, central bank governor Worrell said fiscal consolidation remained “ a priority” for the government, and aims to cut the deficit by two percentage points of GDP during the full year 2016-17.
Challenges remain. The country’s credit rating score, according to the latest ECR rankings, is at its lowest level since 1995. And every major ratings agency has voiced its concern about the relatively high level of national debt (which is, as it happens, lower or on par with most big European countries).
Yet Worrell believes this problem stems largely from the erroneous perception that lending to Caribbean countries is risky. There is a widespread sense here that the country’s deficit will fall fast with the economy returning to full strength, and it is only a matter of time before ratings agencies change their tune on this extraordinarily stable, well-run and business friendly economy.