This article is dedicated to one of my father’s closest friends, Cedric. He’ll surely chuckle when he finds out—especially since he asked for the tone of this week’s piece. Fitch Ratings recently published, in my opinion, a rather positive outlook on the Barbadian economy. By now, it has been widely discussed. Sentiment is split, and that’s to be expected. We are indeed closer to the bell being rung than not. And with that, you can be sure the yard fowls will scratch for more than what was tossed to them.
I sincerely believe human beings are predictable. Recall my economic take on Sierpinski’s Triangle. Some of you seemed amazed by the connection. I can simplify it even further in light of Fitch’s recent report. Better yet, I’ll explain why their decision to affirm a sub-investment grade (B+) is much ado about nothing. Cedric, however, would prefer I relate it to the behaviour of the yard fowls I’ve grown so fond of.
I’m onto my third generation of fowls. Over the years, a few things have remained constant, provided I feed them and let them roam. I don’t like caging animals, so as long as they don’t wander into the yard of an unwilling neighbour, I let them be. Their routine starts early and sees them return twice before roosting for the night. That’s predictable behaviour.
They relate to one another in expected ways too. Mother hens let chicks steal food from their very beaks. It’s rooted in their habit of feeding chicks while withholding from themselves. It’s a wonder they don’t starve. Cocks, funnily enough, seem frightened of hens—especially during feeding. I’ve seen massive cocks chased around the yard by hungry hens. Physically, they have the upper hand, but perhaps they defer out of some learned respect. Hens, meanwhile, will fight off others for food. Maybe that’s maternal instinct.
Yard fowl behaviour is as predictable as an economy’s—so long as there are no major disruptions. There are some circumstances where those are somewhat predictable. For example, I could likely make my cocks more aggressive by feeding only the hens. Either that, or the males would quickly disappear in search of food elsewhere. They’d likely die young or be nabbed by reckless children for cockfighting.
The Barbados Labour Party government introduced disruptive changes early in their tenure, continuing into the early days of the COVID-19 pandemic. To be fair, I’d say they’ve reintroduced disruption through the recent official launch of free movement of labour for select CARICOM nations. We’ll assume Fitch did not account for this while analysing growth potential. Let’s ignore that for now.
When those two waves of disruption were introduced, the economy—like my yard fowls—was bound to respond dramatically. Feeding patterns changed as government tried to reduce public debt and its own interest payments. If we liken that to withholding chicken feed, a few outcomes emerge. We could expect a fall in economic activity, akin to a drop in the cock population and, eventually, the wider flock. That’s because government became a less active participant in the economy.
I often remind students that government plays a pivotal role in a small open economy. Unlike the current standoff in the USA, Barbados cannot afford a government shutdown. Yes, government spending as a share of GDP is higher in the US, but our private sector is far more dependent on government. One might say the multiplier effect of public spending is greater here. So any move to raise taxes or cut spending has outsized consequences. This may also be true in the US, but the effects are certainly more acute in our case.
Feeding chickens is no different from government spending. If I had to reduce how much I feed them, we’d see an impact. The population would decline—through emigration or death. Chickens go where the feed is. Recall that, initially, government cut spending by suspending debt and interest payments temporarily; delaying payments locally and abroad; and redirecting non-capital expenditure. This led to sluggish growth—if any—while government strategised.
Eventually, the BERT plan was produced, coupled with fiscal reforms focused on accountability. The government chose to drive growth by ramping up capital expenditure and cutting taxes, mostly targeting businesses. They threw the construction industry a lifeline. Not only did they invest in major capital projects toward the end of the pandemic, but they also signalled that the private sector should do the same.
It’s not unlike me falling on hard times and asking neighbours to chip in on feeding the flock. It minimises disruption. If any one neighbour invests more than expected, we may even create a better environment for others to breed. That random hen hiding out under a bush in my yard? She’s a recent immigrant. Take from that what you will.
All things considered, the economic outlook is as expected. Public debt is still absurdly high. We remain exposed to climatic and geopolitical shocks. But, with spikes in capital investment and associated jobs, we’re seeing a continued rebound in tourism arrivals.
Still, that doesn’t say much about tourism spend. The USA has now replaced the UK as our main source market. Americans do spend more, but geopolitical tensions and their own domestic economic struggles may limit that in the near future. Moreover, one of our most consistent sources of arrivals in recent years within the cruise tourism industry. Visitors in this spend so little time on the island that it’s perennially unclear what ripple effects their spending has.
Fitch and the World Bank are correct in anticipating a economic slowdown next year. Given the risks discussed, and the short-term nature of our current recovery, that’s likely. Therefore, there is no grand reason to panic. I’d argue, however, that holding our foreign debt rating at B+ is more about caution than confidence, more so considering the government’s looming liabilities. They currently lean more on local debt, perhaps to prioritise domestic payments, but as those larger foreign debts come due, it remains to be seen how well they manage the fallout.
Just don’t tell the politically yard fowls. I have a feeling they’ll celebrate or scrap prematurely.