Country Report Barbados March 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 an economic downturn 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 pressure rises for fiscal stimulus in 2009. 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 remain large.

The political scene

Although there was a portfolio reshuffle in November 2008, after less than a year in office, there were no major changes to the cabinet personnel. The opposition Barbados Labour Party (BLP) has called for a regulatory examination of the assets and liabilities of the local affiliates of CL Financial (Trinidad and Tobago) after the company's collapse.

Economic policy

The Central Bank of Barbados made a series of monetary policy adjustments in mid-January, including interest rate cuts, the launch of a repurchase facility for commercial banks, and a loosening of the criteria for businesses to access credit guarantees. The fiscal deficit widened in 2008, to an estimated 4.5% of GDP, with strong expenditure growth offsetting a fall in real terms of revenue.

The domestic economy

Economic activity has slowed markedly. Following a sharp deceleration in the fourth quarter, the Central Bank estimates real GDP growth of just 067% in 2008, down from an average annual growth rate of 3.6% in 2003-07. After remaining above 10% for two consecutive months, 12-month consumer price inflation moderated in October, falling to 8.4%. Stopover tourism arrivals fell sharply in the fourth quarter of 2008.

Foreign trade and payments

The current-account deficit widened to US$188.3m (5% of GDP) in 2008, up from US$176.9m in 2007, as a result of surging import spending and sluggish growth of travel receipts.

This report covers the following industry codes:
SIC Code: 70;60;1
NAICS Code: 72;52;11