89 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | SEPARATE FINANCIAL STATEMENTS 2022 BARBADOS PUBLIC WORKERS' CO-OPERATIVE CREDIT UNION LIMITED Notes to the Separate Financial Statements For the year ended March 31, 2022 (Expressed in Barbados dollars) 62 23. Financial Risk Management, continued Credit risk, continued In light of the COVID-19 pandemic, the Credit Union has applied additional adjustments to account for the lagging nature and other deficiencies identified in internal and external credit risk metrics. These include the impact of payment relief put in place during the pandemic, which was likely to mask the detection of increased credit risk on some loans, as well as the impact of savings in economic input variables, which has, in some cases, produced unreasonable results. To address these, ECLs have been stressed by looking at a combination of factors, including industry of employment and its exposure to COVID-19-related risks, the extent to which members have been approved for COVID-19-related payment relief, and the extent to which they have participated in other assistance programs. Other adjustments have been taken to moderate the impact of dramatic swings in economic input variables or their lagging impact on credit losses. Judgment has been required in the development and application of these overlays. Management relies on the prediction of key reputable authorities with expertise in the area. The COVID-19 global pandemic significantly impacted our determination of allowance for credit losses and required the application of heightened judgement. Following the announcement of COVID 19 as a global pandemic on March 11, 2020, by the World Health Organisation (WHO), there was a significant downturn in the level of economic activity across the globe. The significant decline in economic activity has been accompanied by unprecedented levels of government support and central bank policies that resulted in low low-interest rates and the rollout or strengthening of programs that supported companies, payroll and the unemployed. In the case of the Caribbean, the level of economic contraction has been severe as a result of the reduction of tourist inflows to the region. Import economies, such as Barbados also experienced an economic downturn due to higher prices. The adverse impact on our retail and wholesale clients has been partially mitigated through government support programs, multilateral and other external support (including the IMF, WB, IDB, CDB) and the rollout of payment deferral programs by the banking sector. During 2022 many Caribbean economies had a modest economic recovery largely due to increases in travel and tourism. However, the levels of economic activity continued to be significantly below pre-pandemic levels. The economic recovery is expected to continue during next year as travel and tourism continue to improve relative to pre-pandemic levels, supported by rising domestic vaccination rates and the high vaccine update in major tourism source markets. Continued fiscal stimulus and accommodation monetary conditions in some countries will bolster consumer spending and unemployment relief. While the Barbados economy is projected to experience double-digit growth in 2022, the impact of other world economies upon its tourism product and related industries remains highly uncertain. Consequently, the assumptions used to determine our allowances have a higher-than-usual degree of uncertainty. The inputs used in the calculation of the allowance are inherently subject to change, which may materially impact our estimate of the allowance for expected credit losses.
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