Economic Review September 2004

During the first six months of 2004, the Barbadian economy grew by an estimated 3.1%, doubling the growth rate in the comparable six-month period of 2003. The traded sectors expanded by approximately 4.2%, fuelled principally by a strong tourism performance. The increase of 2.6% in non-traded output was more broad-based with transportation, storage and communications and wholesale and retail trade being the major contributors. Despite the robust growth in tourism and higher net long-term capital and financial inflows, the net international reserves (NIR) of the monetary authorities decreased, largely because of strong import growth and sluggish domestic exports. Inflows of long-term capital and the expansion in real economic activity contributed to the rapid accumulation in bank deposits, which continue to outpace the rate of new lending by commercial banks. This outturn, coupled with the reduction in the minimum securities requirement, kept the level of excess liquidity at around the same level as at the end of December 2003. Notwithstanding the available liquidity in the banking system, the Government reduced its borrowing from domestic entities.