Country Report Barbados June 2009

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. Despite rising unemployment in 2009, the Economist Intelligence Unit expects that the prime minister, David Thompson, will continue to enjoy broad-based public support. Barbados will remain the least politically polarised country in the English-speaking Caribbean. The government will be forced to abandon its goal of reducing the public sector debt as revenue shortfalls lead the deficit to widen again. 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. We expect a recession in 2009 before a gentle recovery begins in 2010, in line with a slow rebound in US economic performance. The current-account deficit will narrow in 2009, but will remain large throughout the forecast period.

The political scene

The government has announced a six-month amnesty for illegal Caribbean immigrants ahead of a major crackdown and deportations. Clico Holdings (Barbados) Limited has been placed under the control of a six-member Oversight Committee.

Economic policy

The government's fiscal programme for fiscal year 2009/10 (April-March) foresees a widening of the deficit to 5.4% of GDP (from 5.1% of GDP in 2008/09) as revenue slumps. Total public sector debt should rise to over 100% of GDP by the end of the fiscal year. The Central Bank cut interest rates in May for the third time since December.

The domestic economy

With its two main tourism markets, the US and the UK, now firmly in recession, the number of tourists visiting Barbados has declined markedly in recent months. As a result, the economy contracted by 2.8% in the first quarter of 2009. With economic activity slowing and lower food and fuel prices beginning to feed through to the local market, the rate of inflation eased to 7.3% in February.

Foreign trade and payments

Falling oil prices led to an improvement in the external accounts in the first quarter of 2009. The current-account deficit narrowed by around 31% year on year in nominal terms in January-March (to US$8.5m) as the import bill was reduced by lower global oil prices and falling domestic demand.

This report covers the following industry codes:
SIC Code: 60;1;49;15;70;10;37;53;59
NAICS Code: 52;11;22;23;72;212;336;44