Jan 2007 Financial News

Great economic growth predictions for 2007 [Barbados]

Jan 31, 2007

GROWTH of 4.0 to 4.5 per cent. That's the expectation for 2007, according to Governor of the Central Bank, Dr. Marion Williams. Some may call it a conservative estimate with the economic expansion expected for the ICC Cricket World Cup 2007 (CWC 2007) but according to Dr. Williams the second half of the year had to be taken into account.

Governor Williams was addressing the press yesterday morning at the Central Bank during her review of the economy for 2006. According to her, a favourable on-budget performance is likely for 2007.


"Relatively high wages settlements payable in 2007 could lead to faster growth in Government expenditure. However, there has been a recent upturn in Government revenue from VAT and corporate tax. Government capital expenditure should slow considerably as many projects related to the activities surrounding CWC 2007 are concluded," said the Governor who painted a very rosy picture of the Barbadian economy in 2007.

The traded sectors appear to be readying themselves for one fine showing after several years of modest performance which paled in comparison to the non-traded sectors. Yet the non-traded sectors should not be discounted just yet. They are still expected to show buoyant growth on account of activity surrounding CWC 2007. Wholesale and retail, transport, storage and communications are projected to be the main drivers. "Traded sectors output is forecasted to pick-up at a faster rate than it did in 2006, mainly on account of an expected robust performance in the tourism industry. Indeed the staging of the CWC 2007, together with the strength of the pound sterling and a recovery of cruise tourism augurs well for the industry. In addition, an upturn in the non-sugar agriculture and fishing industries is expected," said Dr. Williams.

Even inflation is projected to be reforming its high-flying ways, that is, if it receives enough incentives, and unemployment is expected to maintain its low profile.

"Employment levels should remain relatively high, while the inflation rate should be lower than that of 2006 as the recent slide in oil prices is likely to continue. Even if geo-political tensions and supply constraints halt the current downward movement in oil prices, it is not expected that oil prices would return to the high levels experienced in 2006," said an optimistic Dr. Williams.

In fact the only economic players not expected to be on their best behaviour are the retained imports. They are still expected to show strong growth during 2007 exacerbated by the removal of the cess at the end of February. The good news is their impact on the current account and the Net International Reserves (NIR) should be less severe.

"Travel credits are forecasted to rise at a rate exceeding that of 2006, occasioned by a better out-turn for tourism. Thus, the external current account deficit is projected to improve beyond 2006's level. Consequently, the NIR should show a marginal decline as capital and financial inflows are likely to continue," Dr. Williams noted.

Marita Greenidge
The Barbados Advocate
Wednesday, January 31, 2007.
http://www.barbadosadvocate.com/NewViewNewsleft.cfm?Record=29717