Disclaimer: The views and opinions expressed by the writer(s) don’t represent the official position of Barbados TODAY.
By Michael A. Callender
It was announced yesterday that Fitch Rankings, the agency that ranks the credit-worthiness of borrowers by rating their debt or other securities using a standardized rankings scale, has assigned Barbados a rating of ‘B’ and a stable outlook to the sovereign debt grade. The agency cited a variety of reasons for its decision that included enhanced growth prospects amid the recovery within the tourism sector, the achievement of a new IMF program in September to support reforms after the conclusion of a successful one in June, and an improving fiscal situation. Standard & Poor’s had earlier given Barbados a credit standing which stands at B- with a stable outlook.
Well, what does meaning for Barbados? You’ll be able to say for starts that it’s a relief from the times once we were told with monotonous regularity that our long-term foreign currency sovereign credit rankings were lowered since the country’s fiscal adjustment fell wanting stemming one other increase in debt to GDP, which was already very high and a key credit constraint; and that the Central Bank financing of the federal government’s deficit continues, exacerbating Barbados’ financial and external weaknesses with the outlook for the country remaining negative.
That being said, the variety of employed individuals in Barbados increased to roughly 126,000 within the second quarter of 2022 from an approximated 123,000 in the primary quarter of 2022. The Consumer Price Index (CPI) in Barbados increased to 224.40 points in July from 222.90 points in June of 2022. The CPI is a measure of the common change over time in the costs paid by consumers for a market basket of consumer goods and services. One other adjustment was in the fee of food which increased 17.4 percent in July of 2022 over the identical month within the previous 12 months.
The last set of statistics quoted will not be in any respect a surprise given what everyone knows, that’s, the fee of every part is skyrocketing not only in Barbados but all around the globe individuals are burdened with increased cost of products and services. No person desires to pay higher prices for anything. We all know we’re in big trouble once we see the worth of used cars on the rise, when in point of fact the worth of a automotive depreciates every time that we turn the important thing within the ignition.
We are able to’t really assign a pass/fail grade to the federal government when the runaway prices that we face is driven mainly by imported inflation. I’m inclined to deal with inflation as a world issue because no matter what monetary or fiscal adjustments we make in relation to inflation the economic ship will still have a difficult time navigating the turbulent waters because we’re a net importer.
The inflation rate for the ten years leading as much as 2021 was on a downward trajectory, but all of this was upended with a sequence of world events leading off with the pandemic that hit us in 2020, and more recently the war within the Ukraine.
It goes without saying that governments worldwide pumped insane amounts of cash into the economy in response to the pandemic at a time when there was a disruption in the worldwide supply chain attributable to strict Covid-19 protocols that brought the world to a standstill. Consequently, a surging demand for consumer goods when the provision chain was disrupted, and an excessive amount of money was chasing fewer goods, that scenario created a strong concurrence of things to trigger the avalanche that brought on inflation.
Surging commodity prices attributable to the war in Ukraine can also be a contributing consider what we’re experiencing. The associated fee of every part is spiraling uncontrolled and we’re all paying lots more for a similar exact things that we were paying for a 12 months ago. Russia is the biggest producer of crude oil after the USA and Saudi Arabia, also credited as the biggest crude oil exporter together with Saudi Arabia, and don’t forget that Russia is the biggest exporter of oil. The Ukraine is the world’s largest producer of grain and a disruption of any of those commodities can throw the world economies off-kilter.
Containers now spend twenty percent more time within the system, because they’re held up in congested ports, and there may be a shortage of labour within the transportation industry which limits equipment and transport capability relative to the quantity of trade on demand.
Governments have raised rates of interest to slow the pace of inflation, that may be a balancing act that’s difficult to implement at times because you continue to must keep rates of interest low enough with a purpose to keep the economy afloat. Increases in rates of interest over time will certainly decelerate the speed of inflation, but there may be negative consequences brought on from slower economic growth and better unemployment.
In light of all that was said above, what can a rustic like Barbados do when we’ve got little control over external aspects? We cannot pull the strings to effect change in the worldwide marketplace so we’ve got to sit down like a passenger on a bus, without brakes, heading down a hill at ‘break-neck’ speed just hoping and praying that our last redeeming effort, the emergency brakes, is not going to fail us.
This column was offered as a Letter to the Editor.