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The Barbados economy grew by approximately 4.5% during the first half of 2007, compared to an increase of 3.7% in the corresponding period of 2006. The expansion in real GDP reflected primarily the continued robust performance of the non-traded sectors and a moderate tourism outturn. Despite strong non-traded sector led growth, higher estimated receipts from the upturn in tourism activity in the second quarter contributed to a lower external current account deficit. The improved external current account combined with significant net long-term capital and financial inflows boosted the foreign reserves of the monetary authorities. These inflows strengthened the level of liquidity in the banking system, manifested in strong growth in bank deposits amid a slowdown in new bank lending. Government incurred a sizeable fiscal deficit, the majority of which was financed by domestic lenders.