Country Report Barbados December 2008

Outlook for 2009-10

The Democratic Labour Party (DLP) government enjoys a comfortable parliamentary majority and is not expected to have difficulty enacting its legislative agenda during its term in office, which is scheduled to run until 2013. The prime minister, David Thompson, enjoys broad-based public support and Barbados remains the least politically polarised country in the English-speaking Caribbean. Although the DLPs election platform was populist-leaning, the Economist Intelligence Unit expects broad economic policy continuity in the forecast period. A sharp downturn in world economic conditions, and in particular a deep contraction in demand in the US and UK, Barbados's main trading partners, will constrain real GDP growth in 2009-10. The depth of the US slowdown and the expectation of a slow rebound in 2010 will act as a drag on Barbados's growth prospects; we expect a mild recession in 2009 before a recovery begins in 2010, in line with US economic performance. The current-account deficit will remain large.

The political scene

Hamilton Lashley, a member of parliament from the opposition Barbados Labour Party (BLP), left his party on September 10th, declaring himself an independent. He has long had fluid political allegiances; he won his parliamentary seat as a member of the Democratic Labour Party (DLP) in 1994, but crossed the floor to join the BLP government in 1998.

Economic policy

With fiscal performance expected to weaken further in 2009, in line with a deteriorating economic outlook, the government plans to rely more heavily on Barbados's well-established system of tripartite consultations to shape economic policy. The central government fiscal deficit reached 3.4% of GDP in January-September 2008, up from 1.7% of GDP in the year-earlier period, reflecting a significant rise in total expenditure.

The domestic economy

The Central Bank of Barbados reports that growth slowed to an annual rate of 1.7% in the first nine months of 2008, down from 3.5% in the year-earlier period and the weakest performance since 2003.

Foreign trade and payments

The current-account deficit for January-September 2008 was US$276.4m (equivalent to 7.2% of estimated 2008 GDP), up from US$156.4m in the year-earlier period. While no detailed breakdown was available at the time of publication, trade account data indicates an overall deterioration.

This report covers the following industry codes:
SIC Code: 59;70;49;60;10
NAICS Code: 44;72;22;52;212