Barbados

Politics:

• Analysis

  Barbados politics: Quick View - DLP facing uphill struggle ahead of next el

  Event

  Despite weak levels of support, the prime minister, Freundel Stuart, has begun a bid for a second term in an election due no later than January 2013.

  Analysis

  Doubts emerged within the governing Democratic Labour Party (DLP) in 2011 about the wisdom of allowing Mr Stuart to lead the party into the next election, which is constitutionally due by January 2013 (although it could be called earlier). Nonetheless, Mr Stuart attempted to rally party support for his bid by predicting a certain victory at the DLP's annual conference on August 19th. The prime minister has not faced an election of his own, having succeeded the previous DLP leader, David Thompson, following Mr Thompson's death in October 2010.

  The latest comprehensive voter poll in Barbados-taken by Caribbean Development Research Services (CADRES) and published in late May-showed Mr Stuart with only 29% support and a 43% level of rejection. When asked who was the preferred prime minister, 30% of respondents chose the former three-term prime minister and leader of the opposition Barbados Labour Party (BLP), Owen Arthur, compared with just 10% who preferred Mr Stuart. Mia Mottley of the BLP, who was ousted as party leader in 2010 after a political battle with Mr Arthur, came in as voters' second choice for prime minister, with 25.5% support.

  The DLP is currently the largest party in the legislature, with 20 seats against the BLP's nine (one seat is independent). The economy and cost of living are top of voters' concerns: real GDP expanded by only 0.2% in 2010 and 0.4% in 2011 following a recession in 2009, among the lowest rates in the region. Our current forecast envisions growth of only 1.2% of GDP in 2012, which would provide no boost for Mr Stuart's re-election chances.

  August 29, 2012

• Background

  Barbados: Key figures

  David Thompson

  Currently prime minister, David Thompson was first elected to public office in a by-election after the death of the prime minister, Errol Barrow (1966-76; 1986-87), winning his parliamentary seat in 1987. He served as minister of community development and culture from 1991-93; he was subsequently appointed as finance minister until the 1994 election. At the age of 32, he was chosen to succeed the then-prime minister, Erskine Sandiford (1987-94), as leader of the Democratic Labour Party (DLP) after Mr Sandiford's resignation. Mr Thompson unsuccessfully led the DLP in elections in 1994 and 1999. He resigned as party leader in September 2001 following his third electoral defeat as party leader. However, Mr Thompson regained his position as opposition leader in January 2006 and led the DLP to a decisive victory two years later. In addition to his duties as prime minister, Mr Thompson has direct responsibility for several major portfolios, including economic affairs and development, labour, the civil service, and energy.

  Mia Mottley

  Currently leader of the opposition Barbados Labour Party (BLP), Mia Mottley, a lawyer by profession, was first elected to parliament in 1994; soon after, she was appointed as minister of education, youth affairs and culture. Ms Mottley subsequently served as attorney-general, deputy prime minister (2003-08), and minister of home affairs (2001-06). From 2006 to 2008, she served as economic affairs and development minister. Following the BLP's election defeat in January 2008 Ms Mottley succeeded prime minister, Owen Arthur (1994-2008), as party leader and became leader of the opposition. She comes from an influential family, which has been politically active for three generations in Barbados, Trinidad and Tobago and elsewhere in the Caribbean.

  The judiciary

  The judiciary is independent and effective and is broadly based on English common law with district magistrates' courts for preliminary hearings, a high court and a court of appeal. In 2005 Barbados replaced the Privy Council with the Caribbean Court of Justice (CCJ) as a final court of appeal, and will also use the new court to settle disputes relating to the Caribbean Community single market.

  The legislature

  The legislature is bicameral, with an elected House of Assembly (the lower house) and a nominated Senate (the upper house). The Senate comprises 21 senators appointed by the governor-general: 12 on the advice of the prime minister, two on the advice of the leader of the opposition and seven by the governor-general. Appointments to the Senate can be revoked during the life of a parliament. The House of Assembly has 30 members elected by universal adult suffrage for a period not exceeding five years. Policy formulation in some areas is imaginative and forward-thinking. Administration is generally competent, although decision-making is sometimes subject to delays.

  Media services

  The media is free and broadly non-partisan, giving voice to a fairly wide range of opinions. There are two daily newspapers, The Advocate and The Nation, as well as cable and broadcast television, and a variety of radio stations. Call-in programmes provide an important forum for public discussion.

  July 31, 2008

• Structure

  Barbados: Political structure

  Official name

  Barbados

  Form of government

  British-style representative system

  Head of state

  Queen Elizabeth II, represented by a governor-general

  The executive

  The governor-general appoints the leader of the largest party in parliament as prime minister; a cabinet is then appointed by the governor-general on the advice of the prime minister

  National legislature

  Bicameral; the 21-member Senate (the upper house) is appointed by the governor-general, 12 members on the advice of the prime minister, two on the advice of the leader of the opposition and seven by the governor-general alone; the House of Assembly (the lower house) has 30 members directly elected to represent single-member constituencies for a term of five years

  Legal system

  Based on British law; judicial appointments are made by the governor-general; final appeal rests with the UK Privy Council

  National elections

  Next elections due by January 2013

  National government

  The DLP holds 20 seats in the 30-member lower house; the BLP holds nine seats

  Main political organisations

  Government: Democratic Labour Party (DLP)

  Opposition: Barbados Labour Party (BLP)

  Key ministers

  Prime minister: Freundel Stuart

  Attorney-general, minister of home affairs: Adriel Brathwaite

  Agriculture, food, fisheries & water resource management: David Estwick

  Commerce & trade: Haynesley Benn

  Environment & drainage: Denis Lowe

  Education & human resource development: Ronald Jones

  Family, culture, youth affairs & sport: Stephen Lashley

  Finance & economic affairs: Chris Sinckler

  Foreign affairs & foreign trade: Maxine McClean

  Health: Donville Inniss

  Housing & lands: Michael Lashley

  Industry, small business & rural development: Denis Kellman

  International business & international transport: George Hutson

  Labour & social security: Esther Byer-Suckoo

  National security, public service, immigration & urban development: Freundel Stuart

  Social care, constituency empowerment & community development: Steve Blackett

  Tourism: Richard Sealy

  Transport & works: John Boyce

  Central Bank governor

  DeLisle Worrell

  December 01, 2012

Economy:

• Background

  Barbados: Economic background

  GDP per head was US$11,237 in 2005 (the latest available actual data), higher than most other countries in the 14-member Caribbean Community (Caricom). Tourism is the main industry, but the economy is relatively broad-based. Offshore finance and informatics are important foreign-exchange earners and there is also a light manufacturing sector. The sugar industry, once the mainstay of the economy, has declined, but remains an important employer and exporter. Fishing and livestock, dairy and vegetable production are focused on the local market. Infrastructure is well developed by Caribbean standards, as are the healthcare and education systems.

  Gross domestic product by sector
  (constant 1974 prices; Bd$ m where series is indicated; otherwise % change year on year)
  	2001	2002	2003	2004	2005
  Sugar	21.4	19.3	15.6	14.8	16.4
  	-14.7	-9.8	-19.2	-5.1	10.8
  Non-sugar agriculture & fishing	34.0	33.8	35.4	33.3	36.3
  	-5.8	-0.6	4.7	-5.9	9.0
  Mining & quarrying	9.4	10.0	8.4	9.2	9.9
  	-10.5	6.4	-16.0	9.5	7.6
  Manufacturing	62.5	63.2	62.1	63.5	64.9
  	-9.9	1.1	-1.7	2.3	2.2
  Electricity, gas & water	35.6	36.9	38.0	38.7	38.5
  	4.4	3.7	3.0	1.8	-0.5
  Construction	78.2	84.2	84.7	87.1	98.8
  	6.8	7.7	0.6	2.8	13.4
  Wholesale & retail trade	183.5	185.7	193.2	204.9	215.2
  	-3.1	1.2	4.0	6.1	5.0
  Tourism	147.9	143.8	153.8	168.2	164.4
  	-5.9	-2.8	7.0	9.4	-2.3
  Transport, storage & communications	82.4	80.0	82.3	86.8	91.1
  	0.7	-2.9	2.9	5.5	5.0
  Business & general services	164.8	161.0	168.2	175.3	183.1
  	-0.7	-2.3	4.5	4.2	4.4
  Government	132.2	140.7	135.5	143.1	148.1
  	-1.6	6.4	-3.7	5.6	3.5
  Total	951.9	958.6	977.2	1,024.9	1,066.7
  	-2.6	0.7	1.9	4.9	4.1
  Source: Central Bank of Barbados, Annual Statistical Digest, 2006.

  Download text file (csv format)

  July 31, 2008

• Structure

  Barbados: Economic structure

  Economic structure: Annual indicators

  	2008a	2009a	2010a	2011a	2012b
  GDP at current prices (Bd$ m)	8,687.4	8,793.3	8,490.2	8,625.6	9,311.1
  Real GDP growth (%)	0.3	-4.1	0.2	0.6	0.4
  Consumer price inflation (av; %)	8.1	3.6	5.8	9.4	5.3
  Population (‘000)	272.0	273.0	273.0	274.0	274.5
  Exports fob (US$ m)	489.6	381.0	430.7	476.7	465.2
  Imports cif (US$ m)	-1,832.5	-1,366.3	-1,507.4	-1,606.4	-1,435.4
  Current-account balance (US$ m)	-486.5	-310.2	-258.6	-358.5	-307.7
  Current-account balance (% of GDP)	-11.2	-7.1	-6.1	-8.3	-6.6
  Reserves excl gold (US$ m)	738.5	871.2	833.5	812.6	792.8
  Total external debt (US$ m)	989.0	1,112.6	1,219.3	1,260.4	n/a
  Exchange rate (av; Bd$:US$)	2.0	2.0	2.0	2.0	2.0
  a Actual. b Economist Intelligence Unit estimates.c Economist Intelligence Unit forecasts.

  Download the numbers in Excel

  Origins of gross domestic product 2011	% of total	Components of gross domestic product 2011	% of total
  Agriculture, forestry & fishing	4.3	Private consumption	74.3
  Manufacturing & mining	4.8	Government consumption	19.2
  Construction & utilities	11.0	Gross investment	14.8
  Tourism	12.3	Exports of goods & services	47.1
  Wholesale & retail trade	22.2	Imports of goods & services	54.5
  Business, general services, transport & communications	29.3
  Government services	16.2
  Principal exports 2011	% of total	Principal imports 2011	% of total
  Manufacturing	30.1	Consumer goods	37.6
  Chemicals	26.1	Food & beverages	17.6
  Rum	13.1	Intermediate goods	45.5
  Crude oil	13.7	Fuel	5.1
  Other food & beverages	2.3	Construction materials	24.2
  Sugar	3.9	Capital goods	16.5
  Main destinations of exports 2011	% of total	Main origins of imports 2011	% of total
  Trinidad and Tobago	18.5	Russia	38.3
  France	10.4	Trinidad and Tobago	35.8
  US	9.5	US	26.7
  St Lucia	8.6	China	8.8
  St Vincent and Grenadines	0.0	UK	3.6

  Download the numbers in Excel

  Download text file (csv format)

  December 01, 2012

• Outlook

  Barbados: Country outlook

  Barbados: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  OVERVIEW: Barbados will remain one of the most politically stable countries in the English-speaking Caribbean, thanks to low levels of corruption and a business-friendly, open economy. As a result of the low popularity of the prime minister, Freundel Stuart of the Democratic Labour Party (DLP), the Economist Intelligence Unit envisions a victory by the opposition in the January 2013 elections. After a protracted period of economic weakness, we expect GDP to expand only modestly in the 2013-14 forecast period, owing to the need to keep fiscal policy tight, coupled with a tepid outlook for tourism. A series of consolidation efforts, coupled with a rise in taxes, will help to bring the fiscal deficit down to 3.5% of GDP by 2013. The incoming government, however, will be forced to enact stricter measures after the election. The Central Bank of Barbados will continue to prioritise its support of the fixed exchange rate (set at Bds2:US$1) but will have to contend with high inflation in 2013-14 (averaging 4.9% annually). The current-account deficit will narrow to 5.9% of GDP by 2014, but will remain structurally large, owing to the country's large import requirements.

  DOMESTIC POLITICS: Mr Stuart, who took over the reins following the death of David Thompson (2008-10) in October 2010, has been recently confirmed to lead the DLP in the forthcoming general election of January 2013. The choice was seen as highly risky, considering that Mr Stuart has faced declining popularity since becoming prime minister. This owes largely to the economy's poor performance in the past four years-GDP grew by just 0.2% in 2010 and 0.6% in 2011, following a recession in 2009, and has remained lacklustre so far this year. The government's policy options are relatively limited, as the economic outlook will continue to depend largely on a sustained improvement in external demand (a situation that looks increasingly unlikely, owing to weak forecast demand from the US in the short term). Policy options will also be limited by the large fiscal deficit and deteriorating public-sector debt ratios, which will force the government to adopt unpopular measures to boost revenue and keep expenditure in check. A sharper focus on immigration policy will remain popular among the electorate, much of which sees immigration as a reason for the current high rates of unemployment among Barbadians. Major policy shifts, however, will have to wait until after the election as neither the DLP nor its main rival, the opposition Barbados Labour Party (BLP) will want to jeopardise popular support. Despite some internal power struggles in the party, three-time former prime minister, Owen Arthur (1994-2008), has boosted his approval ratings heading into the final stretch and is currently well ahead of Mr Stuart in the polls. The BLP will continue to focus its electoral strategy on attacking the government's poor track record in managing the economy. The forthcoming elections will pit the ruling DLP against the opposition BLP. Under Mr Arthur's leadership, the BLP has been the dominant political force in Barbados in 1994-2008, but currently holds only nine seats in the House of Assembly, compared with the DLP's 20. His return to the leadership of the BLP in 2010 has given the party greater impetus in the run-up to the 2013 election, and he currently enjoys a substantial poll lead over Mr Stuart, whose support has plummeted because of the dismal state of the economy. Given that a quick turnaround in economic fortunes is unlikely between now and the election, we envisage that Mr Arthur will return as prime minister for the fourth time.

  INTERNATIONAL RELATIONS: Barbados will continue to place emphasis on economic and cultural co-operation within the Caribbean region through the Caribbean Community (Caricom), and on the development of a common Caricom position on trade with North America and Europe. However, an initiative to establish a Caribbean Single Market and Economy among Caricom members was put on hold following an early July meeting in St Lucia, and a tentative 2015 deadline has been suspended. Relationships with the US and the UK are strong, and co-operation with both countries on drug-trafficking, money-laundering and drugs transshipment issues will remain a high priority. Government interest in boosting the island's profile as an offshore financial centre has led to numerous tax arrangements with its trade and investment partners, and we expect further progress in this area throughout 2013-14.

  POLICY TRENDS: The current government has prioritised fiscal consolidation and we expect its successor to do the same (regardless of which party wins) in order to bring down the public-sector deficit to manageable levels. However, weak real GDP growth will complicate these efforts and could force the government to adopt more drastic measures, such as new or higher taxes and wage freezes on public-sector workers. Heavy dependence on external economic conditions, particularly in the US, will limit policies to boost domestic demand, and unemployment will remain high compared with historical averages. However, on the positive side, Barbados will continue to benefit from an open, liberal economy with little corruption and an educated workforce. This will prompt greater diversification of economic activity into areas such as provision of business and financial services, owing to Barbados's status as a growing offshore financial centre. Tourism will nevertheless continue to play a vital role as the country's single most important economic sector and the government will seek to attract a greater number of visitors and investment from faster-growing markets, such as Latin America and China. The country's fortunes in attracting greater tourism revenue will also largely determine the recovery of the construction sector, which was one of the hardest hit sectors during the 2008-09 downturn and which is only slowly recovering. In terms of monetary policy, there is an ample stock of foreign reserves, which will be supportive of the exchange-rate peg (set at Bds2:US$1), thereby helping to underpin confidence in monetary stability. Following a massive fiscal deficit of 9.1% of GDP in 2010/11 (April-March), consolidation efforts-coupled with a rise in taxes-have helped to bring the deficit down to 4.6% of GDP in 2011/12, but it has since crept up to 5.9% of GDP during April-September as revenue has fallen by 2.2% year on year and spending increased by 1.6%. Such levels are high compared with historical figures and are well above sustainable rates in the medium term. Although we expect the deficit to fall to 3.5% of GDP by 2014, this forecast is subject to the risk of weaker than expected global growth (particularly in the US), which would have significant knock-on effects on domestic revenue. Government debt reached 79.3% of GDP in September 2012, higher than the 76.1% of GDP level seen in the same period of 2011 and over half as much again than the debt stock held at end-2005. We expect public debt to peak at 84.1% in 2013 before falling modestly, but it is not likely to fall to pre-crisis levels (around 50% of GDP) during this decade. External debt represents less than 30% of the total, which although high is not excessive for such a small and open economy. The IMF has recommended that fiscal adjustment include the removal of zero-rate value-added tax, as well as a reduction in tariffs charged by some public-sector companies (mainly transport and water), but such a strong adjustment is unlikely during 2013-14, making it harder to bring down the public debt more quickly. Further attempts to reform the budget management process, as well as efforts to overhaul the pension system, will also be postponed as the government focuses on cutting expenditure.

  ECONOMIC GROWTH: Barbados has struggled to recover from the fall-out of the 2009 global financial crisis. And in the first nine months of 2012, real GDP is estimated to have grown by just 0.2%, leading us to revise our full-year estimate to just 0.4% in 2012 (down from 1.1% in our previous report) and our forecast for 2013 down to 1.8% (from 2%). The need to keep fiscal policy tight will impair growth given the still large deficit. Like most small, open economies in the Caribbean, Barbados is heavily dependent on external demand, particularly from the US-which represents its main source of tourism (and investment)-but also from the UK and, increasingly, other Latin American economies. The tourism sector alone accounted for 12.3% of economic output in 2011 and could represent as much as 40% if indirect spillovers into real estate, construction and retail are included. Construction, which grew by 4.4% in 2011, has yet again stagnated, having expanded just 0.5% year on year up to September, and it is unlikely to see a more robust revival until the tourism sector recovers some of its earlier dynamism. This will largely depend on stronger consumer demand in the US and the UK in 2013-14. Sluggish domestic performance will also weigh on GDP growth, as unemployment has increased to double-digit levels, real wage cuts hit private consumption and the fiscal consolidation needed to bring down the deficit limits government spending. On the upside, agriculture will recover from a poor sugar harvest in 2010-11 and reforms to boost transparency in the financial sector will help to reverse some of the difficulties facing offshore markets as a result of tighter global regulation. In addition, the country's profile for healthcare tourism will also be boosted by a US$100m state-of-the-art hospital and research space.

  EXTERNAL ACCOUNT: As in most Caribbean economies, the external sector is vital to Barbados in order to finance its dependency on foreign manufactures and to obtain the necessary reserves to sustain the exchange-rate peg. The current-account deficit widened to 8.3% of GDP in 2011 (from 6.1% of GDP in 2010), but has since narrowed back to 5.5% of GDP in January-September. We estimate that the deficit will fall to 5.9% of GDP by 2014, but this is still a structurally high level owing to the country's large import requirements in addition to commodity prices remaining well above their historical averages. At 19% of GDP, the services surplus is the largest positive contributor to the current account. The low probability of a significant pick-up in tourism (a number of flight routes have been cancelled and a regional low-cost carrier has gone bankrupt) will also act as a constraint to reducing the deficit, as is the growing concern of US rum subsidies to Puerto Rico and the Virgin Islands, which could erode market share for what is one of Barbados's most important exports. On the positive side, business and financial services rank second to tourism, thanks to Barbados's status as an offshore banking centre and also as a destination for information technology outsourcing. However, higher labour costs and increasing regulation on offshore centres will constrain short-term growth in these sectors. Merchandise exports will suffer from sluggish industrial performance and unpredictable agricultural conditions (a drought hit the country's sugar harvest in 2010/11 and production has recovered only modestly). Barbados will continue to run a moderate income deficit and the low level of remittances received will be partly offset by transfers abroad. Overall, we expect the current-account deficit to be financed adequately by capital inflows, particularly private flows (which shrank significantly during the recession in 2008-09 but are bouncing back), as well as official inflows from multilateral lenders for infrastructure and budgetary support.

  November 30, 2012

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Country Briefing

Land area

431 sq km; the most easterly of the Caribbean islands, situated 460 km north-west of Venezuela

Population

274,000 (2011 estimate)

Main town

Bridgetown (capital), population 96,578 (2006)

Climate

Sub-tropical

Weather in Bridgetown (altitude 55 metres)

Hottest months, June-August, 23-31°C; coldest month, February, 21-28°C (average monthly minimum and maximum); driest month, February, 28 mm average rainfall; wettest month, November, 206 mm average rainfall

Language

English

Measures

Metric system

Currency

Barbados dollar (Bds$) = 100 cents; the Barbados dollar is pegged to the US dollar at an exchange rate of Bds$2.00:US$1

Time

4 hours behind GMT

Public holidays

January 1st; January 21st (Errol Barrow Day); April 28th (National Heroes' Day); Good Friday; Easter Monday; Whit Monday (seven weeks after Easter Monday); May 1st (Labour Day); August 1st (Emancipation Day); First Monday in August (Kadooment Day); First Monday in October (UN Day); November 30th (Independence Day); December 25th-26th

March 20, 2012