Until geopolitical issues, including wars in major international markets that are vital for the production and transportation of important commodities are resolved, Barbadians will face cost of living pressure even as Government continues to cushion the impact of rising prices.
That is the reality, says Minister of Finance Ryan Straughn, who has returned home from the International Monetary Fund (IMF) and World Bank annual meetings in Bangkok, Thailand, where he raised these concerns with the international community.
In its latest outlook, the IMF is projecting that consumer prices in Barbados will increase by 2.6 per cent this year, while international credit rating agency Fitch expects inflation “to remain around two per cent in the near term, with the potential for it to rise”.
The Central Bank will give an updated inflation figure at its third quarter economic review next week, but reported in June that inflation was 1.4 per cent at the end of May and predicted it would increase to between two and three per cent “in the near term”.
Inflation measures the rate at which prices rise. A lower percentage does not signal a decline in prices, but that they are increasing at a lower rate.
“One of the issues that I raised over there [in Bangkok] with the authorities was that if the world continues to try using what I describe as market policy instruments to resolve what are really geopolitical issues, then we will continue to see this cost of living pressure increase globally,” Straughn told the MIDWEEK NATION.
“And certainly Barbados, we’ve done all the right things in terms of reform and trying to get our economy back in shape, but these decisions that are being taken by the developed countries, whether it is through wars, whatever it is, continue to create stress for countries like ours.
“So until . . . the geopolitical matters are resolved, so that the genuine demand and supply of the market will be back in place, then we’re going to continue to see these cost of living issues.”
The minister said cost of living concerns were evident in Europe and the United States, noting that “it has always been a part of our feature because of the nature of how we rely logistically on Miami and the like for a lot of what we do.
“And once the tariffs went into place, then obviously it just accelerated the impact, especially post-COVID,” he said.
“So in the short to medium term, until those geopolitical things are resolved, we will continue to see these cost of living pressures build. It’s unfortunate because Government could only absorb as much as we can and still maintain the delivery of public services that we want to deliver for the public.”
Diversify import sources
Straughn had hoped that by now the private sector’s efforts to diversify its import sources would have achieved more success, as he observed that Miami remained a major source of supplies.
“Regrettably, as some in the private sector have seen, some movement in terms of seeking alternative sources of not just goods but alternate routes to get the goods into Barbados, it hasn’t been as swift as we would like, because we are still relying pretty much on the ease and the convenience that we built with respect to the logistics out of the port of Miami,” he said.
“And so, I think we really must make sure then that once the Government will continue to do what it can, the private sector equally has to be more proactive in relation to making a difference in relation to where they get stuff from and investing in other productive ventures.”
He added: “Now, I think equally, the use of monetary policy to solve geopolitical issues also continues to create challenges because it just means that your cost of financing for projects and for the private sector globally will increase at a time when, naturally, you really need to be much more accommodating.
“But the solution to the geopolitical issue is really the key thing because as you well know, once prices go up, they don’t likely come back down as quickly, if at all. Whilst fuel prices generally do fluctuate, other prices, generally speaking, don’t adjust by the same magnitude.” (SC)
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