East Caribbean Business Forecast Report Q3 2009

Publication Date	June 2009
Publisher	Business Monitor
Product Type	Report
Pages	46
ISBN Number	1745-0543
Product Code	BMI03952

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Summary

Given the small, open nature of the regional economy, we believe that the Caribbean will suffer a prolonged period of economic recession - far worse than the downturn witnessed during the post- September 11 tourism slump. We are projecting regional real GDP growth of -2.5% and -0.3% this year and next, but warn that the risks remain skewed to the downside should global demand destruction hurt the Caribbean's key industries - specifically financial services, real estate and tourism - more than currently anticipated. As economic activity cools and unemployment rates start to grind higher, there is a risk of widespread public disgruntlement, which could lead to increasing protests, provoke an already-fragile security environment and erode the popularity of governments across the board.

In this report, we assess which countries are likely to suffer most as a result of the acute external headwinds, and which are best placed to recover once the global dust settles.

With none of the major countries in the Caribbean facing general elections this year, we expect a measure of political stability in 2009. Having said that, local authorities will have their work cut out to curb the growing violent crime problem that has plagued the region in recent years. According to preliminary figures, Jamaica and Trinidad & Tobago both suffered their bloodiest year on record in 2008, registering homicides of 1,600 (62 per 100,000) and 549 (42 per 100,000) respectively. While both governments have outlined a more dynamic security policy framework going forward, we believe that the crime issue will remain a major problem for policymakers going forward.

The economic outlook in the Caribbean is gloomy, with much of the region staring down the barrel at recession. Few countries, if any, will remain unscathed, with only Trinidad & Tobago out of our 'big six' (including Puerto Rico, Guyana, Barbados, the Dominican Republic and Jamaica) projected to register positive growth in 2009. The main risk is a deeper and more protracted recession in the US and UK - two developed world markets which are vital for the influx of tourism, remittances, and financial services earnings into the region.

The government bailout of Trinidad & Tobago's financial giant CL Financial Group and the Stanford Group scandal have sent shockwaves across the Caribbean financial system. Given the exposure of the firm to a wide array of industries across the regional economy, the resilience of the Caribbean banking sector could come under pressure in 2009. Add to the mix the likely weakness of offshore financial hubs (such as the Cayman Islands) due to the precarious position of developed world hedge funds and Washington disapproval over regulatory frameworks, and we caution that the outlook for Caribbean finance looks sombre.

Content

BMI Ratings - East Caribbean
- BMI Ratings - Brief Methodology
- Executive Summary
- Braced For The Worst In 2009/2010
Chapter 1: Regional Outlook
- Economic Outlook
- Clouds Form Above Offshore Financial Centres
- Financial services play a vital role in the Caribbean, with many islands developing global Offshore Financial Centres in recent years to reduce their dependence on tourism and agriculture
Chapter 2: Country Reports
- Barbados
- Political Outlook
- Tighter Immigration Raises Economic Alarm Bells
- While the introduction of tough immigration criteria may cause some regional fallout, we believe the decision should bolster Barbadian Prime Minister David Thompson's popularity at a time when the domestic economic outlook is weakening
- Economic Outlook
- Fiscal Accounts In For Rough Ride
- With the outlook for Barbados's key tourism and offshore financial services industries looking bleak, we anticipate a rapid deterioration in the country's fiscal accounts in 2009
- Key Sector Outlook
- Domestic Banking Sector Pretty Healthy
- While believe that dwindling tourist levels, lower remittances and a lack of inward investment threaten a substantial increase in non-performing loans this year, Barbados' banking sector appears in relatively good shape when compared to regional peers
- Guyana
- Political Outlook
- New Lease Of Life For Opposition?
- A successful bid to head up Guyana's main opposition by Dr Richard Van-West Charles would improve the People's
- National Congress Reform chances in the 2011 elections, in our view
- Economic Outlook
- Fiscal Crunch In 2009
- Despite the government's refusal to cave in to calls from the business community for substantial counter-cyclical expenditure, we believe a huge fiscal deficit will be unavoidable in 2009
- Key Sector Outlook
- Environmental Strategy Polluted
- Guyanese President Bharrat Jagdeo's recently announced plans for a 'new Guyana economy' appear to be an attempt to benefit from the recent inauguration of a more environmentally-friendly US administration, and the United Nations
- Environment Programme 'Global Green New Deal' initiative
- Trinidad & Tobago
- Political Outlook
- Crime Problem Here To Stay
- With first quarter crime figures already soaring, we believe that 2009 is shaping up to be the bloodiest year on record in
- Trinidad & Tobago
- Economic Outlook
- Fiscal Outlook On Red Alert
- Trinidad & Tobago's public finance will not emerge unscathed from the global downturn
- Key Sector Outlook
- Delaying The IneviTable
- Trinidad & Tobago's state energy company Petrotrin signed a contract with UK independent Bayfield Energy on April to explore and develop the Galeota Block, offshore eastern Trinidad
Chapter 4: Country Summaries
- Anguilla
- Antigue & Barbuda
- St Kitts & Nevis
- Saint Lucia
- Saint Vincent
- Suriname
Chapter 5: Special Report
- The Outlook For Global Banking
- Business Environment Rating Outlook
Chapter 6: BMI Global Assumptions
- Global Assumptions
List of Tables
- Table: BARBADOS - ECONOMIC ACTI VITY
- Table: GUYANA - ECONOMIC ACTI VITY
- Table: TRINIDAD & TOBAGO-ECONOMIC ACTI VITY
- Table: Anguilla - Macroeconomic Data And Forecasts
- Table: Antigua And Barbuda - Macroeconomic Data And Forecasts
- Table: Saint Kitts and Nevis - MACR OECONOMIC DATA AND FORECASTS
- Table: St Lu cia - Macroeconomic Data and Forecasts
- Table: ST VINCENT & THE GRENADINES: MACR OECONOMIC DATA AND FORECASTS
- Table: Suriname - Macroeconomic Data And Forecasts
- Table: LOAN-TO-DEPOSIT RATI OS, Selected States
- Table: LOAN-TO-DEPOSIT RATI OS, Selected States
- Table: LOAN GROWTH, Selected States
- Table: COMMERCIAL BANKING BUSINESS ENVIRONMENT RATIN GS, SELECTED STATES
- Table: GLOBAL ASSUMPTIONS
- Table: GLOBAL & REGIONAL REAL GDP GROWTH
- Table: EMERGING MARKETS
- Table: COMMODITIES