Country Report Barbados

Publication Date	June 2008
Publisher	EIU
Product Type	Report
Pages	25
ISBN Number	not applicable
Product Code	EIU00072

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Summary

Outlook for 2008-09

The Democratic Labour Party (DLP) government, led by the prime minister, David Thompson, enjoys a comfortable parliamentary majority and is not expected to have difficulty enacting its legislative agenda during its current term in office, which is scheduled to run until May 2013. The DLP’s most urgent challenge will be to unite the country, which remains divided following a highly contentious election period. Although the DLP’s election platform was populist-leaning, the Economist Intelligence Unit expects broad economic policy continuity in the forecast period. We project a central government deficit of 3.8% of estimated GDP for fiscal year 2007/08 (April-March). GDP growth is expected to slow in 2008 as tourism demand from the US and UK moderates.

The political scene

The political scene has been quiet since the January general election. Barbados has applied to the UN to secure additional maritime territory. In its annual narcotics report, the US State Department noted a continuing increase in cocaine transshipment through Barbados since 2004.

Economic policy

As a result of higher government spending, partly on costly subsidies to control inflation, the fiscal deficit for the first quarter of 2008 reached its highest level since the early 1990s and four times the year-earlier period. The Central Bank of Barbados reduced its benchmark interest rate by 25 basis points (to 4.5%) on April 1st2008.

The domestic economy

According to preliminary estimates from the Central Bank, real GDP grew by 4% in the first quarter of 2008, up from 2.6% in the first quarter of 2007. The Central Bank reported strong growth in the traded sectors, particularly in tourism, for the first time since 2004. Although no new inflation data has been released since January, there are signs that inflation has risen strongly since the beginning of the year. Tourism investments continue.

Content

Summary
Political structure
Economic structure: Annual indicators
Economic structure: Quarterly indicators
Outlook for 2008-09: Political outlook
Outlook for 2008-09: Economic policy outlook
Outlook for 2008-09: Economic forecast
The political scene: New government focuses on controlling inflation
The political scene: Barbados seeks expansion of maritime territory
The political scene: Concerns continue to rise over narcotics trafficking
Economic policy: Fiscal deficit jumps to highest level since 1990s
Economic policy: Government seeks to control rising inflationary pressures
Economic policy: Central Bank lowers key interest rate
The domestic economy: GDP expanded by 4% in the first quarter of 2008
The domestic economy: Inflationary expectations are rising
The domestic economy: Takeover of major conglomerate finalised
The domestic economy: Tourism performance is mixed
The domestic economy: Tourism investments continue apace
Foreign trade and payments: Current-account deficit narrows despite rising imports
The region: Summary
The region: Several Caricom countries have elections ahead
The region: Drug-trafficking will remain a major security concern
The region: Regional integration will advance slowly
The region: Public finances will remain under strong pressure
The region: The tourism sector will be hit by the US downturn
The region: EU trade adjustments pose challenges
The region: High prices support mining investments
The region: Financial sector's performance will vary across the region
The region: Caricom acts on security measures
The region: Energy prospects raise interest in maritime boundaries
The region: Brazil is newest member of the Caribbean Development Bank
The region: Agreement with EU to be signed by end of July
The region: WTO rules in favour of US on EU banana policy
The region: Caricom to begin trade negotiations with Canada
The region: COTED suspends external tariffs in bid to ease inflation
The region: Tourism performance strong despite US downturn