Tag: Country – Barbados

Are you ready for election year?

Barbados

How economic forecasts and scenarios can strengthen financial planning

It’s already mid-December 2017. Your organisation has already started (or maybe even finalised) your plans for 2018. You have targets and budgets and tactics lined up to take you confidently into the year ahead. But, did you remember that 2018 is an election year in Barbados? Did you factor that in to your organisation’s financial plans?

Election years are typically characterised by increased government spending (which is often accompanied by increased consumer spending) and greater economic confidence. All of the campaigning and promise-making usually puts everyone in an optimistic frame of mind. Given the state of fiscal affairs in Barbados and the generally depressed economic confidence levels, however, maybe 2018 will buck this trend and it will be more or less business as usual. Or maybe the pessimists amongst us will win the day and 2018 will be the worst year, from an economic standpoint, that Barbados has ever experienced. Has your organisation considered the impact of any of these scenarios?

It has been my experience that the economic forecasts included in corporate financial planning exercises are only baseline forecasts. What do I mean by ‘baseline’? Baseline forecasts typically assume that the future will continue more or less in the same fashion as the recent past. In the case of Barbados, therefore, the next 3 to 5 years – i.e. the usual planning period for corporate budgets – will be characterised by:

  • low levels of inflation
  • a fixed 2:1 exchange rate with the U.S. Dollar
  • economic growth rates around 1%
  • unemployment around 10%
  • debt levels over 100%, and,
  • fiscal deficits over 5% of GDP.
But what if one or more of these assumptions no longer holds?

What if the deficit worsens? What if the exchange rate is adjusted? What if the economy slips back into a recession? What if the country is forced into a programme with the International Monetary Fund? What if 2018 is not business as usual and it’s not a typical election year? What impact will these scenarios have on your organisational plans?

And did you consider how economic policy may change depending on which party is elected?

Each party has different ideas on how the country should be run and where emphasis should be placed. Therefore, depending on which government wins the elections, your plans may no longer be relevant.

Including economic forecasts and scenarios into corporate financial budgeting exercises can help you plan for various plausible futures. Not only will you feel better prepared, whichever outcome, but you will also have a better understanding of the likelihood of each scenario, which would allow you to adjust your resources accordingly. Antilles Economics offers a comprehensive range of economic advisory services – for example, workshops, customised forecasts/scenarios and internal stakeholder briefings – that can provide forecasts and scenarios. And, there are various government agencies that publish their expectations about the future, as well as IMF reports and advisories from the international rating agencies. Once you’re confident that you can translate that information into meaningful intelligence for your organisation, they are reliable and trusted sources of economic data.

I’m looking forward to 2018. I think it will be a very interesting year from an economic standpoint. But what may be interesting for us economists, may be devastating for profit-making enterprises. Make sure you’re prepared.

What Next for the Barbados Economy

Barbados

The current state of the Barbados economy

The latest review of the economy from the Central Bank of Barbados (CBB) stated that real GDP in Barbados rose by 1.6% in 2016, compared to 0.9% in 2015, on the back of the tourism industry – long-stay arrivals rose by 6.3% for the year up to December 29. Industries connected to tourism – reflected in sectors such as transport, distribution, utilities, construction and other services – all performed modestly, and these performances contributed to a decline in the unemployment rate to 10.2% at the end of September 2016 from 11.3% at the same point of 2015. The story from the renewable energy industry was also quite promising, with the addition of a 10 megawatt solar photovoltaic farm. As a result of the improvement in economic activity and moderate growth in goods and services exports, the external current account balance improved.

Despite 2016 being the third consecutive year of real GDP growth according to the CBB, the Barbadian economy is still not out of the woods. In fact, it is probably in one of its most dangerous phases since the downturn began back in 2009. The foreign exchange reserves have dropped to 10.3 weeks of imports of goods and services – almost two weeks below the internationally accepted floor of 12 weeks – and the fiscal deficit remains high at a provisional 8.2% of GDP. The drain on the reserves has been caused by a severe reduction in net capital inflows – from $371.8 million in 2015 to $136.1 million in 2016 – while the government seems incapable of reigning in its current expenditure in line with the lower revenue collections. The CBB has been placed in the difficult position of printing money to finance the government’s operations, which has not helped the current low-confidence environment that is at least partially responsible for the fall in net capital inflows.

Policy Options

Policy debates have so far centred on devaluation of the Barbados dollar and/or entering into a financing agreement with the International Monetary Fund (IMF). Our view is that neither of these options would work without the supporting structural changes. Barbados is a net-importer of goods and has limited capacity to substitute imports for locally produced goods should the currency be devalued and imported goods become relatively more expensive. Devaluing the currency would simply make consumption more expensive in an environment where the population has little room to cut back. Already the levels of both personal consumption per capita and personal savings at banks and credit unions have remained relatively unchanged since 2014. For devaluation to work in this economy, the local production capacity would have to increase to such a degree that it seems almost impossible, even in the medium-term; at present, exports of goods represent a mere 16% of retained imports. Concessionary financing appears attractive, but when you consider that the IMF has been advocating for devaluation as one of its policy reforms, the luster starts to fade. Furthermore, the success of IMF programmes, when well-designed, hinges on timely and effective execution, and Barbados does not have a good track record in recent times when it comes to policy execution.

Barbados has to make some difficult decisions and commit to long-term structural change that is sustained beyond political cycles. Many of these changes are in the hands of the private sector. Yes, the government can improve business processes and take its role as a facilitator of business more seriously. We would all welcome more streamlined and transparent processes, with predictable turnaround times and efficient, productive staff. But the economy is the sum of the production of mainly businesses. If the economy is struggling, it’s because businesses are struggling.

Some have argued that Barbados is too tourism-dependent, so when arrivals are down, it affects too large a proportion of businesses in the country and makes the economy too vulnerable. Though there are some large, successful producers, the manufacturing sector is too fragmented, which does not lead to the economies of scale required to produce efficiently in most sub-industries. Agriculture has tremendous room for growth, but once again it may be too fragmented, which contributes to the acres and acres of idle land and inefficiencies that prevent strong, sustainable linkages with other large industries. Renewable energy has great potential for both reducing the amount of imported fuel as well as lowering the overall cost of energy, but the ability of this industry to propel the country out of its woes will hinge on the timing of investments. And the cultural industries, long lauded as the future of economies all across the Caribbean, are still too disorganized to even facilitate a reliable estimate of its size.

The short-term policy options can be boiled down to two interconnected themes: create some breathing room and raise confidence. In the public sector, government can reduce its deficit by reducing both the expenditure of state-owned enterprises and the government’s wage bill. Doing so should provide the government with the financial space to tackle its arrears and reform the entire public sector, both of which would go a long way to improving the public’s trust. Demonstrating that it is committed to fiscal responsibility would also assist with negotiations to gain low interest rates on any future debt.

The private sector is willing to lend its support and demonstrated this by its recently called for a return to active dialogue and cooperation under the Social Partnership. The Social Partnership is a series of protocols that commits the Government of Barbados, labour (represented by the Congress of Trade Unions and Staff Associations of Barbados) and business (represented by the Barbados Private Sector Association) to cooperating to develop the economy in the long-term interests of the country. The last protocol expired in 2013. A return of the Social Partnership would not only raise the confidence of residents, but could also assist the government with tackling arrears and ensuring a smooth adjustment of its wage bill.

But the devil is in the details and that’s where all planning discussions start to fall apart.

Greening Vehicular Transport in the Caribbean

Aim of the Project

Caribbean countries are largely dependent on fossil fuels to supply most of their energy needs. In Jamaica fossil fuel imports account for 28 percent of merchandise imports, and for 27 percent in both Guyana and Cuba. One of the main consumers of energy imports in the region is the transport industry.

Having regard to this, a study – “Greening Vehicular Transport in the Caribbean” – was commissioned by an international donor organisation. The main goal of this project was to conduct a cost-benefit analysis to assess whether the electrification of transport in a small island economy – Barbados – could reduce dependence on fossil fuels, boost economic growth and enhance sustainability.

Antilles Economics was engaged by the organisation to conduct the study and present the results at a regional workshop involving policymakers.

What We Did

This project required a number of research approaches. First, stakeholder interviews were conducted with individuals in transport, finance, and electricity generation and distribution. Second, a survey of consumers was conducted to assess their willingness to use and pay for electric vehicles as well as their general opinions and views on greening transport. Finally, the primary data collected was combined with secondary data to provide an assessment of the potential impact of greening transportation on foreign exchange reserves, business investment, the environment, fiscal balances and economic growth.

The study found that greening the transport industry could hold a number of macroeconomic and environmental benefits, such as having a national store of renewable energy. The paper also reported that there is demand for electric vehicles but the current incentive structure is somewhat perverse.

Impact of Project

The results from the project were presented to a regional group of stakeholders and policymakers interested in transportation. Since the dissemination of the report more countries in the Caribbean have begun the electrification of their transport industry, particularly in the OECS. In addition, many of these countries have reformed their tax and duty structure to make electric vehicles more economically feasible.

The Recovery of Consumer Spending

The Barbados economy appears to be emerging from a prolonged economic slump, fueled mostly by personal consumption. In large measure, funding challenges appear to explain the contraction in consumer spending experienced throughout the downturn, and the shift from purchasing non-essential items (such as vehicles) to purchasing essential items (such as food) over the last 7 years. The year 2015, however, may turn out to be a pivotal year, as all sources of funding appear to be on the rise. This is positive news for consumer goods and retail businesses, as 2015 could mark the return of at least moderate growth in consumer spending.

Read more about the Recovery of Consumer Spending here

To learn more about how Antilles Economics monitors economic and industry developments, click here to learn more about our Dashboards.

AE Impact Story: Modelling the Stability of the Barbadian Financial System

Aim of the Project

The financial system is one of the most important parts of an economy, governing all movements of capital between agents. It also provides useful indicators of the health of an economy and various groups such as government entities, private companies and individuals. Many observers of any economy will therefore pay close attention to developments that could affect the stability of the financial system.

Antilles Economics was engaged by an international body to develop a model of the financial system of Barbados and to conduct an analysis of its stability.

What We Did

This project required a number of modelling techniques, including both regression analysis and statistical analysis. The first step was to build a model that accurately captured the linkages between financial agents and the rest of the economy as well as between financial agents.

We then assessed whether various stakeholders in the economy were responding to legislative changes, economic developments, internal decisions or some combination of these.

Finally, we estimated the extent of the shock that would be required to cause the financial system to fail. We considered three types of shocks: those originating from outside of Barbados; those originating from within Barbados, but outside of the financial system; and, those originating from within the financial system itself.

Impact of the Project

The resulting model and analysis was used by our client to strengthen their surveillance of Barbados. It was also used to help our client determine what additional support it could provide to the Government of Barbados.

Information Gaps Limiting Investing

The Barbadian financial market has not always behaved as theory would suggest, especially when considering most investment products. For example, fixed income investments holdings decrease when theory suggests that they should increase; the volume of stock market trading may have a stronger tie to the attractiveness of the market generally rather than economic activity; and, the mutual fund market is heavily influenced by government incentives.

One theory explaining the disconnect between investment theory and observed market trends in Barbados could be that insufficient information results in suboptimal wealth allocation. Our research uncovered four information gaps that influence potential investors’ demand for investment products:

  • Limited understanding of features of financial instruments;
  • Limited information on all features of financial instruments;
  • Lack of trust in financial institutions; and,
  • The inability to comfortably asses risk and return.

These gaps lead to dissatisfaction with local investment options, apprehensive and risk-averse attitudes to investing, and a lack of trust in financial institutions. Combined, they result in an overall low appetite for investing in Barbados. To stimulate potential investors’ appetites, financial institutions must repair existing information gaps by ensuring that their investment information is easy to understand, comprehensive and clearly communicated, thus building confidence in their organisation and investing generally.

To read the entire article, click here .

 

Ron Johnson, MD Blueprint Creative Inc, on Customer Experience in Barbados

Ron Johnson is the Managing Director of Blueprint Creative Inc, a brand development firm based in Barbados. Blueprint Creative Inc and Antilles Economics recently collaborated to survey consumers about Customer Experience in Barbados. The following interview with Ron provides his perspective on the results.

We have just released the results of our Customer Experience Survey for Barbados. Did the results surprise you?

Because there is very little first-hand information on customer experience in the Barbados market, we weren’t sure what to expect. We viewed this survey more as a ‘starting point’ to form hypotheses about the impact of customer service on consumer behaviour. I can say, though, that we are very pleased that the survey uncovered a number of very useful insights about consumer behaviour in Barbados. This is exactly the type of research which Barbadian companies can use to better understand their customers and improve their customer service.

 

What made you reach out to Antilles Economics to conduct a national survey of customer experience for Barbados?

The study was driven by the need to provide our clients with Barbados-specific data on customer behaviour. Prior to this study, much of the data on customer experience was gleaned from other countries. We recognised that due to cultural differences between consumer markets, extrapolating data from one market to another may have resulted in incorrect assumptions about consumer behaviour on the island. We understood that conducting a national survey would help uncover insights about consumer behaviour that are specific to the Barbadian market. We also knew that these insights could be used to help our clients with their branding initiatives, so we were very excited about the project.

We specifically reached out to Antilles Economics because we recognised that the company has the industry experience and insight to conduct such a survey. In addition, Antilles Economics has an excellent reputation for professionalism and efficiency in all areas of research, market intelligence analysis and forecasting, so that also influenced our decision to partner with Antilles.

 

In your work on brand development, have you found a strong relationship between brand perceptions and customer service? Expand.

Yes. Generally, we’ve found that consumers that have experienced poor customer service tend to have a poor perception of the company providing that service. We’ve found this to be true even in cases where the service provider exceeded other customer expectations such as providing reasonable pricing for their products and services. In other words, in the eyes of customers, having a competitive pricing policy is no excuse for providing poor customer service.

 

How can companies improve their customer service perceptions in the eyes of consumers?

There are a number of ways in which companies can improve the levels of customer service across the organisation. An important first step is for companies to proactively launch initiatives that help them to truly understand their customers’ service expectations, preferences and pain points. Many customer service professionals refer to this as understanding the voice of the customer. Depending on the size of the company and the industry in which it operates, companies can use initiatives such as face-to-face interviews, focus groups, surveys, mystery shopper programmes and Information Technology (IT) solutions to better evaluate their levels of customer service. The options for listening to your customers are limitless and can be both qualitative and quantitative.

Another important step is to demonstrate to customers that the organisation is serious about customer service. If your initiatives reveal that customers have a legitimate customer service concern, acknowledge it and fix it. Once you’ve made a commitment to fixing the challenge, be sure to follow through. If you reassure the customer that you will improve the situation, but then do nothing, your brand reputation will take an even worse hit.

I also believe that it is also very important for companies to benchmark and emulate global organisations that are known for consistently delivering amazing customer service. You can simply run a Google search for “best customer service stories” and you’re sure to find some heartwarming and inspiring stories from some of the global leaders in customer service.

 

One of the findings of the survey was that a large percentage of consumers felt unable to switch from a company that they were not happy with. How do you believe this affects the company’s brand development and customer service activities?

Brands with customers who are unhappy and feel trapped should pay close attention to their customer service activities. Simply because they feel trapped, some consumers may become very critical of the company as they discuss the brand with their friends, family members or colleagues and may be able to influence their purchasing decisions. This can have a severe impact on the reputation of the brand. With companies who have monopoly status, there is also the possibility of a mass exodus of customers if the market eventually opens up.

There may also be another group of “trapped” consumers who simply throw their hands in the air in acceptance of their situation. This group may believe that since they are already locked in a long-term contract, their service provider may not feel the need to improve service to them and that their voices won’t have any impact. In this scenario, it may be more difficult for a business to improve its customer service if they are not receiving any upfront, honest feedback.

Both of the groups mentioned above can impact a brand’s development and the success of its customer service efforts. Organisations with customers who may feel trapped should be sure to embark in a number of proactive activities that will engage their customers and assist the brand in gathering the information relevant to improving its customer service experiences.

 

How does your organisation use this type of research?

As a branding company, we understand that consumers’ views on a company’s level of customer service can have a significant impact on its overall brand. The national survey uncovered a number of very useful insights into consumer behaviour in Barbados and consumers’ expectations on customer service. We plan to use these insights in at least two ways. Firstly, we will use the information to build a stronger Blueprint Creative brand. We will also use the insights to help our customers build stronger brands.

 

What are the main takeaways from the results that you would like Barbadian executives to be aware of?

A main takeaway for Barbadian executives is that dissatisfied consumers have a tendency to “leave brands without saying goodbye”. The survey uncovered that while a significant number of consumers are likely to switch to a competing brand due to poor service, they are less likely to register their dissatisfaction with management. This may lead to a scenario where customers have already switched to a competitor before management even realises that it has a customer service issue. This could be potentially devastating for companies as it may eventually lead to an exodus of customers before the company has had a chance to address the deficiencies in service. Management teams who are more proactive in monitoring their company’s levels of customer satisfaction may find themselves in a better position to use customer experience as a competitive advantage.

A second takeaway is that Barbadian consumers are highly likely to tell their friends, family members and colleagues about their customer experiences. Businesses who maintain high levels of customer satisfaction can benefit tremendously from (free) word-of-mouth marketing. At the other end of the spectrum, businesses with low levels of customer satisfaction will likely have to contend with having a brand that is tarnished in the marketplace.

To really benefit from these results, executives will need to remember that customer experience goes much deeper than activities such as employees being pleasant during interactions with clients. For instance, customers also want to interact with employees who have a deep understanding of the products and services being sold by the brand and who are empowered to solve customer problems without excessive red tape. Many other factors such as product pricing, after-sale follow-up and return policies can all influence customers’ opinion of the brand.

 

How would you advise executives to incorporate these findings into their customer service strategy?

These findings provide clear insight on how Barbadian consumers respond to high levels of customer service and also how they respond to low levels of customer service. The level of an organisation’s customer service can have a tangible impact on the organisation’s brand, and by extension, on its profit potential. For companies that value customer service and provide customer service training for employees, the findings can provide clarity on exactly why customer service is important to the organisation and why employees need to provide high levels of service.

Additionally, rather than seeing customer experience as a ‘bolt on’ module, leaders should incorporate their customer experience strategy into their overall business strategy. Every employee has a role to play in helping an organisation to constantly improve its levels of customer service. The company’s management should provide clarity on exactly how each customer can provide exceptional customer service. For this reason, customer experience needs to be championed at the organisation’s highest levels of leadership and should be cascaded and reinforced throughout the organisation.

 

It’s Confirmed! Customer Service Vital For Business Survival in Barbados

AE Report Cover 85Customer service is very important to Barbadian consumers – so much so, that they would consider paying more to benefit from an enhanced customer service experience. At the same time, however, many consumers feel trapped and unable to switch companies if they receive poor service. Despite these feelings, consumers are not always voicing their complaints to their service providers. Additionally, these consumers are not very vocal online. They are not keeping silent though. They are telling friends, family members and colleagues about their service experiences, and making decisions about which companies to do business with based on the experiences of others.

These are some of the main findings of our recent survey on customer experience, which asked more than 400 consumers in Barbados about their responses to good and bad customer service experiences, how they determine which companies to do business with, and the main reasons why they continued to do business with a company that they weren’t satisfied with.

To access the results of the survey, click here to read the Customer Experience Survey Summary Report.

Blueprint Creative and Antilles Economics surveyed consumers in Barbados to help corporate Barbados gain a better understanding of the impact that customer experience has on businesses. They study was motivated by the need to provide companies operating in Barbados with data to inform their customer service strategic decisions. With no publicly available data, CEOs, Marketing Managers and other executives were forced to rely on data from other countries, which may not always provide the appropriate insight into the Barbados market. This survey is the first step to closing this gap. We have made the data collected during the survey accessible to companies that wish to delve deeper into the data that what is provided in the summary report.

To find out how to access more detailed information, visit www.antilleseconomics.com/customer-experience-insights.