Feb 2007 Financial News

Outlook for Barbados economy in 2007

Feb 06, 2007

THE following is the outlook for the Barbados economy in 2007, presented by Dr. Marion Williams, Governor of the Central Bank of Barbados.

In 2007, economic activity is expected to grow between 4% and 4.5% on the strength of improved performances in traded sector activity and continued buoyant growth in the non-traded sectors.

Traded sector output is forecasted to pick-up at a faster pace 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.

Wholesale and retail, along with transport, storage and communications and business and other services, are projected to drive growth in the non-traded sectors, on account of the increased activity associated with tourism and CWC 2007. 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 geopolitical 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.

With the continued expansions in the non-traded sectors and in tourism, retained imports are predicted to show strong growth in 2007. Moreover, the removal of the cess, which is expected to take place in the first half of 2007, would also be a contributing factor to the growth of imports.

However, travel credits are forecasted to rise at a rate exceeding that of 2006, occasioned by a better outturn for tourism. Thus, the external current account deficit is projected to improve beyond 2006s level. Consequently, the NIR should show a marginal decline as capital and financial inflows are likely to continue.

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 corporation tax.

Moreover, Government capital expenditure should slow considerably as many projects related to the activities surrounding CWC 2007 are concluded. Thus, a favourable on-budget fiscal performance is likely in 2007.

The monetary policy measures implemented by the Central Bank at the end of 2006 are likely to constrain the growth of commercial bank credit in 2007.

However, the expansion in loans could still outpace the accumulation in domestic deposits. Consequently, liquidity in the banking system is expected to remain relatively tight.


Source:
The Barbados Advocate
Tuesday 6th February, 2007

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