Economic Review December 2006

The Barbados economy grew by an estimated 3.5% during the first nine months of 2006, on par with the increase recorded in the corresponding period of 2005. The expansion in real economic activity was led by the non-traded sectors and marked the fifth consecutive nine-month period that the non-traded sectors outperformed the traded sectors. The performance of long-stay tourism was encouraging but cruise remained weak. With these developments, the external current account deficit improved moderately when compared to the similar period of the previous year, mainly reflecting a small decrease in retained imports and a modest expansion in exports of goods and services. Nevertheless, the deficit was still large enough to offset the surplus on the capital and financial account, leading to a decline in the net international reserves (NIR) during the January-to- September period of 2006. The fall-off in retained imports was accompanied by a reduction in the rate of increase in credit to the non-financial private sector, which still exceeded the rate of expansion in domestic deposits, and as a result, excess liquidity in the banking industry tightened. The overall fiscal deficit was smaller than the deficit incurred a year ago, on account of a rise in tax revenue.