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Governor DeLisle Worrell |
Since becoming governor of the central bank of Barbados seven years go, Dr DeLisle Worrell has observed first-hand both the challenges and the delights of managing the finances of this small but sturdy Caribbean island.
His first year in charge at the central bank coincided with the worst global recession in decades. But in the years since, the island’s economy has regained its strength and vitality. Nominal GDP is estimated to have grown by over 3% in the first half of 2016, according to central bank data. The IMF said Barbados’ economy has “turned the corner” and has forecast that economic output will expand by 2.1% in 2016, boosted by higher private and public investment, and a sunnier outlook for the tourism sector.
Through all the turbulence, Worrell has remained determined to play to the island’s natural strengths and to focus, where possible, on helping to diversify the domestic economic base.
“We have had ups and downs since the financial crisis, but our underlying economic growth strategy has been unchanged,” Worrell tells Euromoney. Barbados has always focused on providing the highest quality of service, he adds: giving tourists the richest possible experience, and ensuring that the international business services sector is globally competitive. “So long as we focus on the fundamentals,” he says, “we will continue to build economic strength and stability, helping us to benefit from the good times and build resilience against the bad times.”
Worrell, who began his second five-year term as governor in 2014, is pragmatic to his bones. He knows the island “isn’t going to enjoy spectacular growth every single year”. But, he says, by “focusing on quality, and in continually improving and protecting the quality of our sovereign brand”, the island will always give itself the best chance of long-term success.
Barbados’ economic and financial progress in recent quarters is there for everyone to see. In June, the central bank said that unemployment, in the 12 months ending March 2016, had fallen to 10.7%, from 12.4% 12 months before. Foreign currency reserves fell slightly in the first half of 2016, to $884 million. But the central bank expects that number to rebound, reaching over $900 million by the end of the year.
Much of that recovery in reserves is expected to stem from the resilience of the tourism sector. The number of long-stay tourists rose 5.3% year on year in the first half of 2016, to 319,700, according to central bank data. Tourists renewed their love affair with an island that offers golden sun in winter and the security and sanctity one normally feels only in one’s home.
A host of metrics underline the strength and the depth of the nation’s recovery. Barbados scored 42.58 in the June 2016 edition of the Euromoney Country Risk (ECR) rankings, making it the highest-rated sovereign nation in the east and central Caribbean. Its economic risk, currency stability and monetary policy rankings have improved every quarter since the start of 2015, while its economic outlook ranking was in June 2016 at a near-three-year high, ECR data show.
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Governor Delisle Worrell interacts with Rosemary Alleyne, a member |
Worrell has worked hard in recent years to remind global investors what makes the island such a great business partner. “Working here – whether that means setting up a subsidiary, transferring your skill-set here, or building a company of substance from the bottom up – means giving yourself the chance to build a company of global relevance,” he says. Barbados has long prided itself on being a low-tax regime rather than a no-tax haven, a distinction that matters more than ever.
Many of the country’s biggest and most reliable investors, from UK professional services firms to global hotel groups, remain attracted to an island that offers security, a great climate, excellent infrastructure and a friendly welcome. They also come for the double-taxation agreements and bilateral investment treaties the island has carved out with dozens of other sovereign states since 1970.
These tax treaties help to protect profits made on value added in Barbados from taxation in home countries, while the investment deals ensure that anyone investing in or through the island is guaranteed a fair hearing in an independent court of arbitration. “These vehicles give investors an international competitive advantage,” notes Worrell. “In Barbados, we are not about zero tax. We are all about business-friendly rules, boosting employment, adding value to the economy, and underpinning government revenues.”
Diversification has long been one of the country’s economic and financial watchwords. The professional business services sector is a key employer, as are the retail and pharmaceuticals sectors. A long-term aim is to transform the island into a carbon-neutral economy capable of exporting clean energy, mostly solar and wind generated, to the wider region.
But it is the tourism sector that will remain central to the island’s future. “The Barbados brand is highly coveted, and we are always seeking to make the experience of tourists richer and more varied,” Worrell says. In a region blessed with ample sun and plenty of diversions, a focus on enduring excellence is “by far the best way to strengthen the economy and make it more competitive. That’s our core message, and we are confident of our appeal to the markets with which our tourism sector does the most business. We sell a product we are proud of, and we maintain an international level of quality.”
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Governor Worrell chats with Toni Thorne, a local commentator and |
Challenges remain, as they always will. The big-three ratings agencies remain downbeat on Barbados’ prospects. In September 2015, Standard & Poor’s pointed to the need to boost growth and reduce the fiscal deficit. That narrow view of the health of any given sovereign frustrates Worrell, who points to a tendency among rating agencies to place every Caribbean nation in the same pot. “Global investors have no reason at all to worry about our debt levels,” he says. “Our paper is investment grade, full stop. There has never been a late payment on any of our local- or foreign-currency bonds.”
Then there is the issue of de-risking, a growing problem for frontier and emerging markets. Barbados boasts a strong financial sector, and its government is a strong proponent of international economic and financial laws. But multinational lenders continue to scale back their global presence and are under ever-greater pressure to vet new customers in any jurisdiction. “The level of background due diligence involved in opening a new bank account is much higher now in Barbados than it is in the US,” Worrell says. “That means our financial sector is losing business to the US.” To Barbados and many regional markets, that makes the notion of ‘de-risking’ an oxymoron.
Yet these are challenges that can be overcome. After a routine official trip to the island in May 2016, the IMF noted approvingly that with activity picking up, financial stability improving, the employment rate rising and levels of non-performing loans in long-term decline, the economy appeared “to have turned the corner”. And in a world where differentiating oneself – whether that means the individual, the retail brand or the sovereign – is harder than ever, Barbados will always have an advantage. Through thick and thin, the island has remained true to its core values – solid infrastructure, pristine ecology, a finely tuned tourism industry and a universal commitment to honouring its debt.
