Barbados Economic Outlook
The Barbadian economy is forecasted to grow by around 4.0% in 2007, propelled by the continued strong expansion in the nontraded sectors. In particular, construction activity, transportation, storage and communications services, wholesale and retail trade and business and other services should underpin the growth in the nontraded sectors. Traded sector activity is expected to pick-up on account of higher projected tourist arrivals. Based on these expectations, the average rate of unemployment should remain in single digits for the remainder of 2007 and into 2008. Inflationary pressures are also expected to ease somewhat, though this assumption hinges on the continued moderation of international oil prices.
In line with the forecasted economic expansion, deposit accumulation is projected to continue to surpass credit growth, leading to a build-up in liquidity. Tax revenue has been some what sluggish and, coupled with higher expected expenditure, the fiscal deficit could expand in fiscal year 2007/08.
Despite the increased demand associated with Cricket World Cup 2007, which placed some upward pressure on the level of imports, growth in retained imports is forecasted to remain below the 8.0% average of the last five years. Domestic exports may continue to be sluggish based on the first-half performance, while travel credits should grow in line with tourist arrivals. Consequently, the external current account deficit as a percentage of GDP is likely hover around 7.5%, somewhat lower than the 8.4% recorded in 2006.
The capital and financial account is expected to remain buoyant in 2007. Consequently, the net international reserves are expected to record an increase during 2007.
July 31, 2007