West Caribbean Business Forecast Report Q3 2009

Publication Date	June 2009
Publisher	Business Monitor
Product Type	Report
Pages	46
ISBN Number	1745-0772
Product Code	BMI03953

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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 - West Caribbean
- BMI Ratings - Brief Methodology
- Executive Summary
- Braced For The Worst In 2009/2010
Chapter 1: Regional Outlook
- Economic Analysis
- Clouds Form Above Offshore Financial Centres
- Financial services play a vital role in the Caribbean, with many islands developing global Offshore Financial Centres
- (OFCs) in recent years to reduce their dependence on tourism and agriculture
Chapter 2: Country Reports
- Dominican Republic
- Political Outlook
- Cross Border Raids Weigh On Rating
- Cross-border cattle rustling raids and the threat of incursions by local ranchers from the Dominican Republic into
- Haiti have prompted us to revise down our security ratings for the country
- Economic Outlook
- 2009 Vs 2003: Fundamentals Better This Time Around
- We are forecasting a steeper contraction of the Dominican economy in 2009 than during the 2003 banking crisis, due to the country's high exposure to exogenous shocks
- External Outlook
- TAB LE: DOMINICAN REPUBLIC - ECONOMIC ACTI VITY
- Jamaica
- Political Outlook
- Entering A Fiscal Nightmare
- Declining economic activity will see Jamaica post a primary fiscal deficit in FY09/10 equal to 7.4% of GDP, and a nominal deficit equal to 21.0% of GDP, as interest payments balloon and expenditure rockets
- Economic Outlook
- Ill Placed To Weather The Storm
- We have revised down our forecast for Jamaica's real GDP growth for 2009 and 2010 to -4.0% and -1.5%, from -2.5% and 0.0% previously
- TAB LE: JAMAICA - ECONOMIC ACTI VITY
- Key Sector Outlook
- Puerto Rico
- Political Outlook
- Statehood Referendum In 2009?
- A bill asking for a referendum on Puerto Rico's political status has been presented to the US congress
- Economic Outlook
- A Commonwealth In Crisis
- While many emerging markets have only recently started to feel the impact of recessionary forces, Puerto Rico is on course to suffer its third consecutive year of contraction in Fiscal Year 2009
- TAB LE: PUERTO RICO - ECONOMIC ACTI VITY
- Fiscal Outlook
- Fiscal Tightening To Prove Insufficient
- Aiming to slash the island's structural deficit from US$3.23bn to US$0.50bn, the Puerto Rican government's FY2010 budget proposals look impressive
Chapter 3: Country Summaries
- Bahamas
- TAB LE: THE BAHAMAS - HIST ORICA L DATA & FORECASTS
- Cayman Islands
- TAB LE: CA YMAN ISLANDS - HIST ORICA L DATA & FORECASTS
- Cuba
- TAB LE: CUBA - MACR OECONOMIC DATA & FORECASTS
- Haiti
- TAB LE: HAITI - HIST ORICA L DATA & FORECASTS
- Netherlands Antilles
- TAB LE: NETHERLANDS ANTILLES - HIST ORICA L DATA & FORECASTS
- Turks & Caicos Islands
- TAB LE: TURKS & CAIC OS ISLANDS - HIST ORICA L DATA & FORECASTS
Chapter 4: Special Report
- The Outlook For Global Banking
- TAB LE: LOAN-TO-DEPOSIT RATI OS, Selected States
- TAB LE: LOAN GROWT H (% CHG Y-O-Y), Selected States
- TAB LE: COMMERCIA L BANKING BUSINESS ENVIRONMENT RATIN GS, SELECTED STATES
- Business Environment Rating Outlook
Chapter 5: BMI Global Assumptions
- Global Assumptions
- TAB LE: GLOBAL ASSUMPTIONS
- TAB LE: GLOBAL & REGIONAL REAL GDP GROWT H
- TAB LE: EMERGING MARKETS
- TAB LE: COMMODITIES