Central Bank Governor Proves Moody’s Downgrade Justified
The Central Bank Governor of Barbados has given his Review of the Barbados Economy for the six-month period: January to June 2011 and Barbadians are now in a much better position to judge for themselves whether the Internationally respected – Moody’s Rating Agency – was on a witch-hunt or whether it was justified in its downgrade of Barbados’ Credit Rating, and the forecast it gave on Barbados prospects for the next 18 months.
The other two issues that should be on the minds of ordinary Barbadians are, the Government’s Medium Term Fiscal Strategy (MTFS) and the Budget or the economic policies the DLP Government has so far outlined. Even at this stage, it is crystal clear that the DLP is even failing to meet the targets outlined in that MTFS, while it is also painful that its economic policies are not working and will not work. In short, Barbados is in peril and on a fast free fall from prosperity to crisis and at a time when the DLP does not know what to do.
When you compare what Moody’s said with what the Central Bank Governor has said and would not say (in the context of what past DLP Budgets and that MTFS was expected to have done but have not and will not achieve) you begin to realise that the crisis in Barbados seems far worst that this global financial crisis and the one in the 1920’s combined. What is happening in Barbados was foreseeable and preventable but it was manufactured, in large part – as a result of entitlements without the matching creation of enterprises!
A competent Government, with a Team who has well-honed skill, would have steered Barbados away from this – as has the Government of Guyana and that of Indonesia, which – despite that country having had several earthquakes, tsunamis’, floods and mudslides – still records some 5.5% growth.
We now know that despite a 2.5% increase in VAT, receipts are down by 2%. Could it be that the base of the economy is shrinking (some 10,300 unemployed since January 2008) and that Barbadians are taxed to the max? Whatever the real reason, the Barbados economy is in crisis and Barbadians must be worried, especially since it is now known that neither the DLP’s best plan (it’s MTFS) nor its economic policies, are working. Barbados is adrift!
Increased taxation was intended to close the gap between revenue and expenditure but that gap has widened. The deficit was supposed to come down but it has grown much bigger. This tells you that in circumstances where revenue is not coming in, the economy could not be growing and that in-fact, the base is shrinking. So what exactly would have spurred that alleged growth? All the Central Banks Governor has done is confirmed that the Moody’s downgrade and the Standard & Poor’s caution – are justified.
The up-coming Budget is therefore a non-event because the economic policies introduced by the DLP did not work. The economy is not growing and the country is incapable of any further taxation. What we also know is that as was stated by Moody’s and now confirmed by the Central Bank Governor’s Report, not even the next 18 months but the next six month in Barbados, will be dread. So that, when the DLP tells you that it will now seek to do through the up-coming Budget – what the MTFS failed to accomplish, you know that it does not know what it is doing and that it (the DLP) is engaging in a mere time-wasting exercise.
This brings me to the story of Greece and why it was finally allowed to join the EU. A few weeks ago, concern was raised that the view of the Barbados Statistical Services Department and that of the Central Bank – differed significantly, as regards true state of the Barbados economy. Whether Barbados has a Government it can trust, is one thing but a Government it can no longer afford, is an entirely different ball-game.
This link should therefore make interesting reading:
http://www.telegraph.co.uk/news/worldnews/europe/greece/7646320/Greece-why-did-its-economy-fall-so-hard.html
