Oct 2006 Financial News

Barbados' Trade balance declines to $2.1b in 2005

Oct 23, 2006

Barbados’ visible trade balance deteriorated by $229.2 million (11.8 per cent) to $2.1 billion in 2005, while visible trade payments amounted to $2.9 billion, compared to $2.5 billion one year earlier, representing the largest outflow within the last decade.

According to the Central Bank s recently released Balance of Payments document, the expansion reflected an upturn in merchandise imports, specifically in consumer and intermediate goods imports. Merchandise credits increased for the third consecutive year, by approximately $171 million (29.2 per cent) above the amount registered in 2004. Receipts from goods for processing grew marginally by $4.7 million, while goods procured in ports remained unchanged.
Net receipts from services were $236.1 million (17.9 per cent) higher during 2005, in comparison to growth of $26 million (two per cent) in the previous year. The increase in earnings was propelled mainly by stronger expansion in net tourist earnings, which rose by $256.8 million (18.4 per cent), compared to an upturn of $27.8 million in 2004. Spending by long-stay visitors surged by $316 million, a reversal from the decline of $8.2 million in the previous year, partly a result of increases in the prices of food and alcoholic beverages and transportation.
The report further noted that income outflows worsened by $90.2 million during the year, a result of higher outlays on foreign debt. Total income expenditure amounted to $513.9 million, or approximately $109.6 mill ion more than the payments made in 2004. This outturn was primarily the result of greater portfolio investment outflows to non-residents, with increases of $102.7 million and $3.7 million registered in income on debt and income on equity, in that order. I n addition, direct investment income debits picked up by $1.1 million to $163.1 million, as the $17.7 million decline in income from equity was offset by a $18.8 million rise in miscellaneous direct investment outflows. On the credit side, total income flows improved by $19.4 million to $170 million. The most significant increase occurred in the direct investment income category, which expanded by $13 million on account of greater earnings of $14 million from equity income. In addition, portfolio in vestment income inflows rose by $5.9 million, principally due to a $6.6 million expansion in equity income, which offset the fall-off in debt income ($0.7 million).
Net long-term private sector transactions rose by $61.8 million during the review period, compared to net inflows of $66.9 million on the year prior. Net long-term private sector loans grew by $7.5 million, in contrast to the decline of $41.6 million in 2004. On the liabilities side, long-term and short-term trade credits extended by overseas firms to Barbadian entities climbed by $148 million and $450.5 million, in that order. In addition, long-term trade credits provided by local firms to non-resident companies increased by $38.7 million, while short-term trade credits expanded by $163.6 million.

During 2005, the net foreign assets of Barbados declined by $135.6 million to $1.6 billion. The contraction occurred mainly because of a large decrease of $184.3 million in the net foreign assets of commercial banks, which overshadowed the $59.4 million rise in the reserves of the Central Bank. The outturn in the reserves of the commercial banks was due to significant growth ($330.6 million) in the deposits of non-residents, as well as a gain of $148.5 million in balance s due to banks abroad. On the contrary, the Central Bank component of the foreign assets rose owing to an upturn of $58.2 million in its foreign exchange holdings, a reversal from the $331.6 million decline registered in 2004.

According to the report, the capital and financial account registered a surplus of approximately $585.1 million in 2005, a marked improvement from the $350.6 million registered in the previous year. Net foreign direct investment inflows climbed by $105.7 million, following outflows of $32 million in 2004, driven by a turnaround in investment by foreign firms in their branches and miscellaneous foreign direct investment. Moreover, net miscellaneous investment expanded by $654.3 million, some $207.4 million over the amount post ed one year ago. Net portfolio investment abroad grew by $174.9 million, more than twice the outlays recorded in 2004, as residents of Barbados increased their holdings of foreign equity securities.


The Barbados Advocate
Monday, October 23, 2006.
http://www.barbadosadvocate.com/NewViewNewsleft.cfm?Record=28420