An Early Economic Warning System Is Vital

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Detecting fiscal fractures in the island’s economy in a timely fashion will be made easier with the implementation of an early warning system to track sectoral performance.

The document, which was produced by economists in the Research and Planning Unit of the Ministry of Economic Affairs, in conjunction with the University of the West Indies’ lecturers, Professor Roland Craigwell and Dr. Winston Moore, is another tool which will allow economic planners to predict downturns in the business cycle in advance.

The model was officially rolled out to the public last Tuesday, by Minister of Economic Affairs, Dr. David Estwick, now the Minister of Agriculture, Food, Fisheries, Industry and Small Business Development.?? The event took place at the Lloyd Erskine Sandiford Centre, Two Mile Hill, St. Michael.??

In outlining the importance of the blueprint, he said the tool, which was used by economic planners in the developed world, would be employed to evaluate ongoing and future circumstances within the respective economies.

The Economic Affairs Minister pointed out that technocrats would examine leading, coincident and lagging indices as benchmarks to gauge the movement of the island’s gross domestic product (GDP).

Based on the results of the three indices, Dr. Estwick indicated that government officials, managers and the business sector, would be equipped with additional information that would allow them to "better plan for their business life cycle and implement the requisite strategies to keep them afloat, during the economic crisis."

It would also assist economic planners to have a better understanding of how the economy works; enhance the planning and implementation ability of the Government; provide the tools for improving policy advice to Government Ministers and Permanent Secretaries on the economy and to pinpoint changes in the macro-economic environment.

He reasoned that the system was tested using data which dated back to 1972 to predict the recessionary periods of the past. "In this test, the early warning indices were able to predict the recessions of the early 1980"s, 1990’s and 2000’s, as well as the most recent economic recession.?? Therefore, it is important for different economic agents to follow and predict these fluctuations and their consequences, especially the internal and external shocks, that may affect these variations," Dr. Estwick underlined.

The Economic Affairs Minister stated: "At present, the task of doing this involves the use of different economic measures which can sometimes give conflicting signals about economic conditions.?? To get around this, a composite index that aggregates the movement of key economic indicators has been constructed to provide a single statistic that can track the movement of the economy."

To strengthen the programme, Dr. Estwick disclosed that officials from the Ministry’s Research and Planning Unit, would be conducting a quarterly Business Confidence Survey with the Barbados Chamber of Commerce, to construct an indicator to assess business performance in the short-term.

He also alluded to the development of key partnerships with other countries to support the early warning system.?? "The Ministry will also seek to identify other important indicators that will give support to the early warning system derived from variables that were sourced mainly from the partner countries.?? In addition, it [early warning system] will also include other leading domestic indicators not currently captured in composite indices due to data gaps," Dr. Estwick added.??jwilson@barbados.gov.bb

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