My Year in Review 2018
The Economic Letter
This year my monthly Economic Letter became a widely-anticipated source of information and analysis of the Barbadian economy, written for ordinary citizens. In my January Letter I explained that even though the outlook for the year was dire, my pamphlet The Barbados economy: the road to prosperity offered a recipe for turning the economy around. The central recommendation was a top-to-bottom reform of the public sector, with funded separation packages, supported by the IMF and other multinational institutions. In June I reminded the new administration of these recommendations, and I did so again in October.
In February I wrote about what was expected from public sector reform: improvements in the delivery of all public services, that would strengthen Barbados’ international competitiveness, and be reflected in better roads, educational and health facilities, public transportation and all Government services. I returned to the subject of public sector reform in May, stressing that reform should begin with published reporting by all Government agencies and departments. In July I explained how Government retrenchment should be managed, with incentives for voluntary retirement, provisions for early retirement, training grants, and business and advisory services. In September I stressed the need for fresh leadership in the public sector.
In March I advised that Government ease the excessive burden of taxation, and focus on reducing Government spending as the way to balance the operational expenditures with tax revenue. In April I explained that excessive spending by the public sector was the reason Government had to borrow from the Central Bank. Because Central Bank credit is in Barbados dollars, when the borrowed funds are spent on imported goods, importers have to buy the needed foreign exchange from the Central Bank. Foreign reserves decline as a result.
My topic in August was the potential for stimulating faster economic growth through a careful selection of powerful international operators for the Bridgetown Port and the Grantley Adams International Airport.
In October I drew attention to an IMF report released at the Annual Meetings of the Fund, which advises governments to inventory their assets as well as their debt and other liabilities. The balance gives a more accurate picture of government’s financial position than does the popular debt-to-GDP ratio. The preferred strategy for countries like Barbados which have more assets than liabilities is to improve the productivity of Government’s assets by reforming public services.
Finally, my December Letter cautions that US dollar loans from the IMF, the Caribbean Development Bank and Interamerican Development Bank, have bought only a temporary gain in foreign reserves, and a reprieve for the Barbados dollar peg. Unless Government reaches a mutually agreed arrangement to restructure its US dollar debt, the foreign reserves gain will be lost, and the risk of devaluation re-emerges.
Publications and Working Papers
In April The Handbook of Small States was published, including my joint paper with Winston Moore and Jamila Beckles, entitled “A new approach to exchange rate management in small open financially integrated economies”. The paper shows how small open economies may keep their currencies stable, using taxation, government spending and borrowing strategies. There is no need to depend on Central Bank policy, which is usually ineffective in these economies.
In October I issued a Working Paper entitled “Economic prospects for Trinidad and Tobago”. The paper’s forecast growth of 1.7 percent in 2019, rising to 2.4 percent in the following years, does not take account of the closure of the Petrotrin refinery; data for an assessment of its impact is not yet available.
Also in October I issued a Working Paper entitled “Using fiscal policy to target the exchange rate”, an edited version of a paper presented at the George Washington University Institute for International Policy in April 2017. It provides a technical explanation of the process ofstabilising the exchange rate with the use of fiscal policy.
The Inaugural Confucius Institute Lecture
On January 31, 2018 I delivered this lecture at the Cave Hill campus of the University of the West Indies. I pointed out that the growth of Chinese industrial capacity has been a worldwide benefit. Of particular interest to tropical countries like the Caribbean, China has been a catalyst in making the sun a practical natural resource, by producing affordable photovoltaic panels. I concluded that with sound domestic policies and strategies to accelerate the use of renewable energy, the Caribbean can continue to reap benefits from commerce with China. Furthermore, as we get to know China better, and Chinese investors and consumers learn more of the exceptional products, experiences and investment opportunities the Caribbean offers, new opportunities will open up, further enhancing the region’s growth potential.
Five information graphics were added to my webpage in 2018. The page now includes graphics on foreign reserves, the relative economic sizes of Caribbean and Latin American countries, labour productivity trends, factors affecting Barbados’ competitiveness, trends in Government expenditure and financing, and Barbados’ competitiveness in tourism.
On July 1 I was appointed to the Financial Policy Committee of the Bermuda Monetary Authority. I attended meetings of the Council in September and December.
I also attended the Annual Meeting of the Bretton Woods Committee in Washington DC, during the Spring Meetings of the IMF and World Bank.
I conducted a two-day seminar for policy makers and opinion leaders at the Central Bank of Belize on May 30 and 31. I presented an economic model and a set of practical tools to enable small open economies to manage their exchange rates, maintain competitiveness and achieve sustained growth.
I am associated with the London firm of New State Partners, advisers to the Committee of Holders of US-dollar-denominated Barbados Government bonds, in discussions on the restructuring of the public debt.
I am also Chair of a committee which is organising the launch in 2019 of the Association for Barbados-China Friendship (ABCF).
In January, in collaboration with Professors Olav Hohmeyer and Winston Moore, I prepared for the Barbados Renewable Energy Association BREA) a proposal for a comprehensive strategy to achieve 100 percent use of renewable energy by 2035, the earliest date that seems feasible. To date, funding to undertake the project has not been secured.
Prospects for 2019
For the new year I hope to widen my focus to other Caribbean countries and beyond, with analysis, projections and advice on sensible, practical policies for stable, competitive growth in small open economies. Please be on the look out for the launch of the ABCF. My website (DeLisleWorrell.com) continues to be my main communications outlet, but many of my publications may also be found on the Social Sciences Research Network (ssrn.com).
I owe a special debt of gratitude to my webmaster, Simeon Wukwai, to Roxanne Brancker, Jonathan Reid, Tessa Ottley, and Nicholas King and his team at Marniko Media. They have always responded enthusiastically to my many calls for help. My many research collaborators and colleagues with whom I share ideas and conduct studies are a constant inspiration. I have enjoyed working with my collaborators on the infographics, Lachlan Barker and Natalie Chandler. My thanks also to my friends and colleagues who read drafts of my Economic Letters and other publications, and offered comments. And, it goes without saying, thanks most of all to Monica, my heart.
Merry Xmas to all.