Economic Review September 2005

The Barbadian economy expanded by 3.0% during the first half of 2005, some 2.0 percentage points below the rate of growth for the comparable period of 2004. In contrast to the previous two years, this year’s performance was driven primarily by the non-traded sectors, since a decline in tourism value-added adversely affected the traded sectors. The lower travel receipts, combined with continued strong import growth fuelled by the expansion in the nontraded sectors, led to a deficit on the external current account. Nonetheless, the net international reserves (NIR) of the monetary authorities rose during the period under review, as a result of the transfer of foreign receipts from the commercial banking system to the Central Bank and the solid performance of the capital and financial account. Credit to the non-financial private sector increased for the seventh consecutive quarter in order to finance the high consumer import demand, contributing to a contraction in commercial bank liquidity during the first half of the year. Despite this, the overall fiscal deficit was financed from domestic sources.