Barbados has lost $2 billion in economic activity and has been forced to borrow $1 billion more than it did last year to cushion the impact of the COVID-19 pandemic, Prime Minister Mia Mottley revealed Monday as she painted a gloomy picture of the country’s economy heading into the upcoming fiscal year.
In comparing the figures from the 2019-2020 fiscal year which ends March 30, Mottley said $10.5 billion was the island’s GDP as of March 2020.
But for this fiscal year, Mottley said it was only $8.5 billion
She said: “A loss of almost $2 billion in economic activity as a result of COVID and all that COVID has brought to us. We know it instinctively, we’ve felt it every month, we know the loss of jobs we’re seeing in the country, we know that over 38,000 individuals applied for unemployment benefits last year at the height of it, we know that last month February the numbers are in excess of 11,000 who have applied, and we recognize that what has happened has been a major, major disruption of significant proportions. It is perhaps the largest single drop in our economic performance, certainly since Independence and it is arguable that it is probably the largest single drop since the [Second] World War.”
During debate of the 2021-2022 Estimates of Revenue and Expenditure, Mottley said while Government did not have to borrow any money last year, it would be required to borrow over $1 billion this time around.
Mottley said: “Last year this Government was able to bring to the Chamber a set of Estimates that reflected that in the fiscal year 2019/2020, we did not need to borrow a cent from anyone because we were running a healthy surplus.
“Regrettably, in this fiscal year that will finish in just under 10 days, you will see that the borrowing sum to close the gap is $1 billion. So having had a set of circumstances where this Government was able to carry out the affairs of this country without recourse to significant borrowings in the conduct of our annual Estimates of Expenditure and Revenue for 2019/2020, we cannot repeat the same this year regrettably and we know why.”
Government recorded $2.9 billion in tax revenue and $627.4 million in non-tax revenue a total of $3.6 billion in 2019-2020. This year’s projections are for Government to collect $2.2 billion in tax revenue and $140.6 million in non-tax revenue, a total of about $2.4 billion.
Government spent $550 million in the last fiscal year repaying loans and would be spending $882.1 million this year.
While Government collected $117 million more in corporation taxes, income taxes declined from $492.9 million to a projected total of $303.7 million for this year, while Value Added Tax (VAT) fell from $1 billion to a projected $700 million.
The Prime Minister said despite the financial hardships, Government had still managed to meet its financial targets.
“The only good news is that as of this morning I can say that we have met the financial target of $2.41 billion in revenue so that while we knew it would be $633 million less at least we are meeting the targets that we’ve set ourselves internally so that we can bring some level of order and discipline as we go forward,” she noted.
Mottley said despite the situation, Government remained focused on helping the most vulnerable in society, jumpstarting capital works projects and improving the island’s competitiveness.
The Prime Minister declared: “Those among us who are vulnerable and who are still going through an extraordinarily difficult time must be protected as far as our resources allow us to do so; Government in the face of a private economy that is floundering must step up to the plate and trigger public sector-led growth through an expanded capital works programme and capital programme generally and that even as we do all of this, we cannot take our eyes off the ball of enhancing competitiveness and making it just simpler, easier to do business in this country in a way that has been different from that which we inherited.
“Those three simple things relate to us being able to take care of our people, us being able to keep the country afloat with a level of minimal economic activity that can keep the demand and supply of goods and services rolling over, even if not as much as we would like, and that we recognize that there is much still to be done even as we have done a lot already with respect to building competitiveness of our economy to make us fitter for the purpose of growing…because even as we said when we were in Opposition, you cannot tax your way out of these types of crisis, you have to grow your way out.
“Growth for us must not be jobless growth but must be growth that is fair, equitable and that produces opportunities and jobs for our people.”