DeLisle Worrell: The Barbados economy in 2009 and prospects for 2010
Economic statement by Dr DeLisle Worrell, Governor of the Central Bank of Barbados, at a
news conference, Central Bank of Barbados, Bridgetown, 13 January 2010.
* * *
Overview
As was to be expected in a country that is highly dependent on tourism, the performance of
the Barbadian economy in 2009 was worse than in 2008, by most indicators. The impact of
the economic and financial crisis in industrialised countries showed up in a contraction of real
output, a reduction of foreign exchange inflows and an increase in unemployment. In
addition, the fiscal deficit widened because of a decline in tax revenue, and Government
borrowed both locally and in Trinidad and Tobago to finance the widening gap. However, the
deficit on the current account of the balance of payments narrowed as a result of the fall in oil
prices, which reduced import payments substantially. The key to economic stability in
Barbados is the maintenance of an adequate level of foreign reserves, and the Net
International Reserves (NIR) of the Central Bank remained comfortably above the
international norm for fixed exchange rate countries, thanks in large measure to capital
inflows and an allocation of Special Drawing Rights (SDRs), which the IMF made to all
member countries.
The projections for the Barbadian economy in 2010 are clouded by uncertainty about the
pace and robustness of the recovery in the North American and European markets on which
Barbados' tourism and international financial and business sectors depend. Although
Barbados has a strong showing in the higher income segments, which should be among the
earliest to recover, prospects are for a small decline in real domestic output in 2010, based
on the international economic projections currently available from the IMF and other
international organisations. Unless there is new borrowing, Government's external debt may
decline, because expected inflows from official borrowings are projected to be less than the
amount to be repaid on a maturing market loan. The NIR is expected to be boosted by
private capital inflows, as new projects come on stream, although the current account of the
balance of payments is expected to show no further improvement. However, Government will
need to achieve a reduction in the fiscal deficit in order to avoid excessive pressure on the
NIR, though any reduction will most likely be modest because tax revenues will remain
depressed.
The impact of the economic and financial crisis in 2009
The worldwide economic recession led to a broad-based contraction in output in the
Barbadian economy in 2009, with virtually all sectors suffering adverse effects. Tourism
receipts, remittances and private capital inflows into Barbados all declined, as global output
contracted, international credit markets remained depressed and unemployment rose to
double-digits in Barbados' major trading partners. Moreover, the unanticipated depth and
protracted duration of the crisis resulted in outcomes markedly worse than were projected
before the crisis deepened in September 2008 (See Table 1).
Prior to the onset of the global economic recession, the Barbadian economy was forecast to
slow to 1.8% in 2008 and then accelerate to 2.8% in 2009. However, it turned out that Gross
Domestic Product (GDP) stagnated in 2008, and a significant contraction of 5.3% is
estimated for 2009. The crisis is estimated to have cost Barbados almost 10 percentage
points in economic growth over the two years. This in large measure reflected a drop in
longstay arrivals over the two-year period of roughly 13.3% below the initial forecast, and a 3.9%
decline in cruise passenger arrivals over the two years. The poor performance of tourism
depressed other major sectors of the economy, which provide services to the tourism sector.
The crisis-related loss of foreign exchange from tourism was approximately $170 million.
This, coupled with an estimated shortfall of $465 million in private capital net inflows relative
to initial forecasts, were the main factors in the estimated NIR shortfall of approximately $743
million, compared to pre-September 2008 expectations. However, foreign reserves were
augmented by $232 million from a bond issue arranged by Scotiabank in the Trinidad and
Tobago market, and by the allocation to Barbados of $170 million in Special Drawing Rights.
The Scotiabank bond issue helped to support a widening fiscal deficit that was substantially
greater than pre-crisis forecasts. Because of the contraction in economic activity,
government revenue was about 10% (or $548.5 million) less than the initial forecasts. The
growing deficit was compounded by a greater than anticipated expansion in Government
expenditure, to the tune of $144.7 million, 2.5% more than expected.
Table 1: Estimated impact of the economic and financial crisis in 2009
Source: Central Bank of Barbados Estimates
* This represents the difference between the original forecast and the actual.
**Figure excludes the $170.1 million SDR allocation and the $232.1 million proceeds from the sovereign bond
issue.
Tourism performance
After falling by 1.2% in 2008, tourism value-added plummeted by a further 8.7% in 2009, but
the tourism sector's contribution to total GDP remained around 15%. Preliminary data for the
January-to-November period of 2009 suggests that the decline in output was due mainly to
an almost 11% fall in long-stay arrivals, and took placed in spite of a 6% increase in the
number of landed cruise passengers (Figure 1 shows the relative contribution of long stay
and cruise ship arrivals to tourism output). The contraction in tourism and other exports had
knock-on effects on other sectors, and there were severe declines in construction,
manufacturing and non-sugar agriculture (See Figure 2).
Figure 1: Arrival performance and contribution to tourism output
3.5
140
3
%
90
2.5
40
2
-10
1.5
oitaR
s
-60
1
egnahC
s
-110
0.5
-160 0
2008m1 2008m2 2008m3 2008m4 2008m5 2008m6 2008m7 2008m8 2008m9 2009m1 2009m2 2009m3 2009m4 2009m5 2009m6 2009m7 2009m8 2009m9
2008m10 2008m11 2008m12 2009m10 2009m11
Longstay Contribution (right axis) Cruise Contribution (right axis)
Longstay Arrivals Growth (left axis) Cruise Arrivals Growth (left axis)
Figure 2: Real gross domestic product
%
20
15
10
5
0
-5
-10
-15
-20
-25
2001 2002 2003 2004 2005 2006 2007 2008 2009
Construction Manufacturing Tourism Real GDP
With the exception of Canada, tourist arrivals from all major source markets were down
during 2009. Arrivals from Canada rose by an estimated 14%, mainly because of increased
airlift out of Western Canada and greater marketing in North America. Persistently high
unemployment in the U.K and U.S continued to restrict arrivals from these markets, which
contracted by 13% and 9.8%, respectively. Visitors from Continental Europe and CARICOM
fell by 3.6% and 11.2% (Figure 3). High airfares continued to depress arrivals from
CARICOM countries, as they have since early 2007.
Figure 3: Source market performance (Quarter-on-quarter % change in arrivals)
%
30
20
10
0
-10
-20
-30
UK US Canada Europe CARICOM
Arrivals for the 2008/2009 winter season were 2.6% higher than for the similar period of
2007/2008. Summer arrivals declined by around 9.6%, following a similar decrease of 5.4%
during the comparable period one year earlier (Table 2). The decline in tourism was very
general, and is reflected in hotel bookings, hotel occupancy rates, employment in the tourism
sector, and visitor arrivals during the Crop Over season (Table 3).
Table 2: Visitor arrivals by season
2005 2006 2007 2008 2009 %08/07 %09/08
Winter 252.2 265.5 262.7 238.0 244.2 -9.4 2.6
Summer 349.0 355.2 382.7 362.0 315.6 -5.4 -9.6
Note: Winter arrivals are calculated as the sum of arrivals between December of the previous year and April,
while summer arrivals are calculated as the sum of arrivals between May and November.
Source: Barbados Statistical Services
Table 3: Selected indicators of tourism performance
Other Indicators of 2008 2009
Tourism Performance (%) I II II IV I II III IV
Average Hotel Bookings 8.6 -15.7 -14.1 0.0 -5.3 -11.9 -15.8 -12.2
Hotel Occupancy Rate 76.0 59.0 -- --72.0 52.0 --
--Cruise Ship Calls 10.6 -40.4 -50.0 -33.5 3.8 18.6 70.6 -87.2
Employment in Tourism (000's) 13.3 14.6 14.1 14.0 13.8 13.9 --
--Employment in Tourism (%) 4.7 5.8 -2.1 -7.3 3.8 -4.8 -- ---
Source: Barbados Statistical Services and Barbados Hotel and Tourism Association
Government provided assistance to cushion the blow from falling arrivals by augmenting the
Tourism Industry Relief Fund (TIRF). Applications for financial assistance from the TIRF
easily exceeded the Fund's initial allocation of $15 million, and an additional $10 million was
disbursed by year end.
The outlook is for a small contraction in tourism in 2010, with recovery beginning only in
2011. This forecast is based on the assumption of modest economic growth in Barbados'
major trading partners (the US and UK). Prospects are tempered by continuing job losses in
those economies, and forecasts for additional job losses during 2010. The expected impact
of the increase in the UK tourism air passenger departure tax (APD), implemented in
November 2009, will aggravate the decline in UK arrivals. However, the growth in Canadian
arrivals should remain robust.
International business sector
Tight global credit conditions and persistent efforts by investors to reduce their risk
exposures led inevitably to a further contraction of the international business sector, following
the small decline observed in 2008. The number of new entrants fell, and there was a drop in
the value of corporate tax receipts from the sector. Up to September 2009, new licences
were only a little more than half the number recorded in 2007 and 2008 (Figure 4). After
adjusting for $45.6 million in taxes due in 2008 but recorded in 2009, collections of income
tax from firms in the international business sector for the first three quarters were
substantially below those of 2008 (Table 4). This decline, which follows contractions in both
2007 and 2008, has had a noticeable impact on government revenue, as offshore receipts
have on average accounted for 11% of total government revenue since 2005.
Figure 4: New licences issued to offshore companies (January-September)
500
450
400
350
300
250
200
150
100
50
0
2004 2005 2006 2007 2008 2009
International Business Companies Societies with Restricted Liability Other
Source: Central Bank of Barbados and the Department of Inland Revenue
Table 4: Corporate tax receipts ($ million)
Actual Adjusted*
2007 2008 2009 Change 2008 2009 Change
Corporate Receipts (Offshore) 251.4 219.9 266.9 47.0 274.7 240.3 -34.4
Corporate Receipts (Domestic) 248.4 205.7 190.9 -14.8 196.5 171.9 -24.6
499.8 425.6 457.8 32.2 471.2 412.2 -59.0
Total Corporate Tax Receipts
*These values readjust the collections to reflect the delayed $45.6 million payment from 2008 to 2009
Source: Central Bank of Barbados and the Department of Inland Revenue
As part of its programme to strengthen the existing bilateral tax treaty network, Barbados
signed an additional bilateral investment treaty with the Belgium-Luxembourg Economic
Union (BLEU), bringing to ten the number of bilateral investment agreements which
Barbados has in place. In addition, the number of double-taxation agreements in force
increased to 18 as the accord between Barbados and Mexico, which was signed in 2008,
came into effect.
Other exports
Merchandise exports, as well as receipts from goods and services, continued to be
negatively affected by the tapering off of global aggregate demand and the falloff in
commodity prices over the period. The decline in the output of goods (13.9%) was even more
severe than for services (10.2%), and tourism continued to dominate total receipts during the
period, contributing approximately 64% of total earnings during 2009 (see Figure 5).
Figure 5: Domestic exports
Source: Central Bank of Barbados and Barbados Statistical Services
Exports of domestically produced goods had shown robust growth (averaging 10.3%) during
the five years (2004-2008) prior to the global financial crisis. Beginning in the last quarter of
2008, there were noticeable declines across the entire spectrum of domestic exports as
consumer demand waned. An additional factor in the decline of the production of chemicals
was the closure of one of the island's main producers due to fire in the later part of 2007.
Altogether, physical exports (sugar, chemicals, electronic components, food and beverages,
etc.) contributed 14% to foreign exchange earnings.
Non-traded sectors
The indirect effects of the slump in tourism activity were most keenly reflected in the
nontraded sectors, particularly wholesale & retail, transportation, storage & communications, and
business & other services, which contracted for the first time since 2001-2002. In addition,
waning tourism-related projects, coupled with the tight credit conditions being experienced
internationally, brought a number of real-estate investment projects to a standstill,
significantly retarding activity in the construction and mining & quarrying sectors. Mining and
quarrying experienced its sharpest contraction in more than a decade, while the drop in
construction was more than twice the rate of decline recorded in 2008. Consequently, the
number of persons employed in construction and quarrying decreased by roughly 15%, while
credit to the construction sector and mining & quarrying fell by 6% and 19%, respectively
(Table 5). Output of electricity, gas and water also decreased during 2009 (Figure 6).
Figure 6: Performance of the non-traded sectors (% change in output)
20
15
10
5
0
-5
-10
-15
-20
-25
2003 2004 2005 2006 2007 2008 2009
Electricity, Gas & Water Construction
Wholesale & Retail Transportation, Storage & Communications
Business & Other Services
Table 5: Selected indicators of non-traded sector activity
Indicators 2005 2006 2007 2008 2009P
Crude Oil Production ('000 of Barrels) 348.7 343.4 293.3 289.7 170.6*
(172.8)+
Natural Gas Prod. ('000 Cubic Metres) 23,997 23,466 20,932 20,605 10,959*
+
(12,092)
Electricity usage ('Kwh) 792,868 903,398 941,013 950,264 697,987**
+
(709,386)
Water Consumption (Litres) n.a. 53.5 54.5 n.a. n.a.
Cement Production ('000 Tonnes) 340.7 337.8 316.5 301.4 241.0***
+
(278.8)
Credit to distribution ($ million) 368.8 413.4 403.3 415.8 361.4**
+
(416.1)
+
Credit to mining and quarrying ($ million) 2.9 2.9 5.8 4.9 (5.1) 4.0**
Credit to construction ($ million) 316.1 363.5 352.3 425.9 453.1***
+
(421.8)
Real VAT receipts ($ million) 550.8 615.2 656.4 644.3 476.5
Imports of building materials ($ million) 239.1 244.1 243.2 252.1 133.5**
+
(190.3)
Source: Arawak Cement Plant, Barbados Light and Power Co. Ltd, Barbados Water Authority and Barbados
National Oil Company, Central Bank of Barbados, The Accountant General. P denotes Provisional, *, **, ***
indicate that data is up to July 2009, up to September 2009, and up to November 2009. + indicates that the data
is for to the corresponding period of 2008.
Inflation, employment and productivity
The 12-month moving average inflation rate fell from 8.6% at the end of 2008 to 3.1% at the
end of 2009, reflecting in large measure the return to normalcy of commodity prices during
2008. Slumping domestic demand resulted in a higher unemployment rate, estimated at over
10% at the end of 2009, compared with 8.1% a year earlier. Using the mid-year 2009
estimate of the number of persons employed and estimates of the level of real GDP at the
end of 2009, labour force productivity is estimated to have fallen by 4.1% over 2009. This
reduction is roughly comparable to that of the 2001 recession in which labour productivity
declined by just under four percentage points, and it follows a seven-year period of increases
in real output-per-employee.
Figure 7: Growth in real output per employee
%
6
4
2
0
-2
-4
-6
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Financial sector
The discount rate on Barbados Treasury bills (T-bill) continued to follow the medium term
trend in US T-bill rates. At the onset of the global financial crisis, the US T-bill rate declined
rapidly reaching near-zero. The Barbados T-bill rate declined less dramatically, and the
spread between the two rates as at December 2009 widened beyond the two-percentage
points average registered during the 2000 to 2007 period (Figure 8). In line with the general
reduction in domestic benchmark interest rates, the prime lending rate, and the average
savings rate also trended downward during 2009 (Figure 9).
Figure 8: Treasury bill rates
15.00 16.00
14.00
10.00
12.00
10.00
5.00
8.00
0.00 6.00
4.00
-5.00
2.00
0.00
-10.00
-2.00
-15.00 -4.00
Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09
Bds t-bill rate (left axis) US t-bill rate (left axis) Spread (right axis)
Figure 9: Selected interest rates
Domestic deposits of commercial banks declined marginally during 2009, while credit
accumulation was severely constrained by the general downturn in productive activity.
Notwithstanding the relatively flat performance in credit and deposits, liquidity in the banking
system continued to edge upwards, and commercial banks' holdings of treasury securities
expanded. The excess liquidity ratio rose from 8.9% at end-December 2008 to 10.7% at
endDecember 2009.
Figure 10: Deposits credit and liquidity
9,000
8,000
7,000
6,000
5,000
$M
4,000
3,000
2,000
1,000
0
Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09
Deposits Credit Liquid Assets
As the global financial crisis deepened, regional equity markets, which normally appear to be
unrelated to developments in advanced markets, began to mirror the declines on the New
York Stock Exchange (NYSE). The Jamaican Stock Exchange (JSE)1 composite index was
most responsive among the regional exchanges as its swings mirrored that of the NYSE. The
composite index on the Barbados Stock Exchange fell by approximately 14.5% during 2009,
while the Trinidad and Tobago, composite index contracted by approximately 9.2%. These
declines translated into wealth losses of BDS $1.4 billion and TT $6.5 billion, respectively.
Figure 11: Stock market activity
13 11
12
10
11
9
Hundreds
8 Thousands
7
6
5
4
109876543 3
Jul-07 Jul-08 Jul-09
Jan-07 Apr-07 Oct-07 Jan-08 Apr-08 Oct-08 Jan-09 Apr-09 Oct-09
Trinidad & Tobago (left axis) Jamaica (left axis)
Barbados (left axis) NYSE (right axis)
Fiscal performance
Following a significant worsening of the fiscal position in 2008, there was a further widening
of the fiscal deficit to an estimated $564.6 million (8.4% of GDP) in 2009. This reflected a
marked slowdown in revenue intake on account of the weakened domestic economy and
increased Government expenditure.
Revenues from the VAT, which had increased at an annual average rate of 6.5% between
2001 and 2008, slumped by an estimated 18.1% in 2009. The VAT accounted for an average
of 31.8% of Government revenues in the past five years, and the fall in VAT receipts in 2009
was equivalent to a loss of 5.8% of total revenue.
Despite a shrinking tax base, personal tax receipts rose significantly, on account of increases
in wages and salaries in both the public and private sectors. Corporate taxes had been
consistently increasing since 2003 at an annual average rate of 21.1% up to 2007, doubling
over this period from $250.1 million to $499.8 million. However, intake from this category fell
over the crisis-related period (2007/2009) by a two-year average of 3.6% or $42 million2.
Revenues from the import tax fell by 15.5% in 2009.
Figure 12: Government fiscal balance
0 0
-1
-100
-2
-1.8
-2
-2.2
-200 -3
-3
-4
-3.5
-300
-4.3
-5
-400
-6
-6.4 -7
-6.4
-500
-8
-8.4
-600 -9
2001 2002 2003 2004 2005 2006 2007 2008 2009
Fiscal Balance as % of GDP (right hand side)
Figure 13: Tax revenue by category (in $ million)
2500
Other - Direct
Property
2000
Personal
1500
Corporate
Other - Indirect
1000 Excise
Import Duties
500
VAT
0
2001 2002 2003 2004 2005 2006 2007 2008 2009
Government expenditure rose by an estimated 3.4% in 2009, below the 14.1% increase in
2008 and approximately equal to the average growth rate of expenditure in the 2001-2007
period. The slower rate of expansion in current spending was primarily attributed to the lower
rate of growth in transfers and subsidies, and a reduction in capital expenditure and interest
payments.
Transfers and subsidies were up by 5.1%, on top of an expansion of 19.3% in the equivalent
period one year earlier. The University of the West Indies (UWI), the Transport Board (TB)
and the Queen Elizabeth Hospital (QEH) were the main beneficiaries.
Table 6: Significant Government transfers and subsidies (in BDS$ M)
Institutions
Fiscal Year Q.E.H U.W.I T.B Other Total
2006/2007 130.1 96.8 40.2 553.5 820.6
2007/2008 138.5 105.1 34.8 699.3 977.7
2008/2009 159.5 128.6 40.0 808.9 1137.0
2009/2010 (p) 166.0 126.2 40.9 719.6 1052.7
P: Provisional
Source: Ministry of Finance
In addition to the funds allocated to the Tourism Industry Relief Fund (TIRF) to assist the
ailing tourism sector, Government set up the Employment Stabilisation Scheme3 to assist
businesses with their operating costs provided they maintained pre-crisis levels of
employment. Also, a $10 million fund was created to facilitate the retraining of employees
and the payment of a stipend to participants of vocational training courses who were
registered as unemployed by the National Insurance Board.
Wages and salaries by government rose by approximately 11.3% during the year, after a
moderate contraction of 1.7% in 2008, because of retroactive payments for 2008 and a 4.5%
increment from the start of the FY 2009/10. Goods and services grew by 12.2%, compared to
an increase of 24.4% in the similar period of 2008. In contrast, interest payments were down
by an estimated 22.5%, primarily on account of lower repayment of foreign debt.
Capital expenditure fell only marginally by an estimated 1.2%, as Government jump-started a
number of projects aimed at boosting economic activity. Among these were improvements to
the road infrastructure, the building of an office complex at Warrens and the construction of
housing under its programme Housing Every Last Person (HELP).
Figure 14: Government expenditure by category (in $ million)
Financing
A major portion of the deficit was financed externally by proceeds from the floatation of a
US$120 million bond on the Trinidad and Tobago market. These funds contributed
significantly to the capital and financial surplus and helped to boost the NIR. Some of the
deposits from this loan were placed with the Central Bank, and, along with other Government
deposits accumulated by the end of year, resulted in only a slight rise in net claims on
Central Government by the Central Bank. To fund the remainder of the fiscal gap,
Government continued to rely heavily on other domestic sources. The relatively high level of
liquidity within the banking system allowed commercial banks to extend a substantial amount
of credit to Government. The National Insurance Scheme and private non-bank institutions
were also major financiers of the deficit.
Table 7: Government financing ($ million)
2002 2003 2004 2005 2006 2007 2008P 2009P
Domestic Financing (345.7) (5.7) 165.7 103.0 100.5 215.0 534.1 331.7
Central Bank 283.1 69.6 (22.7) (103.4) 61.9 (56.6) 170.6 3.8
Commercial Banks 139.2 (20.4) 61.1 (73.4) (168.9) 137.4
28.6 75.9
National Ins. Scheme 109.2 25.4 (19.5) 141.4 58.0 154.8 261.3 179.6
Private non-banks 19.9 16.1 97.8 190.9 138.9 189.7 142.9 193.1
Divestment 0.0 0.0 0.0 0.0 31.4 0.0 0.0 0.0
Other (225.8) (112.5) 48.7 (57.6) 20.8 (210.4) (69.3) (120.6)
(30.5) 152.0 (41.3) 154.0 27. 5 (89.3)
Foreign Financing (79.2) 232.9
Capital Markets 0.0 0.0 0.0 245.2 131.9 0.0 0.0 232.1
Project Funds 51.0 57.5 59.4 30.8 38.8 16.7 73.7 109.0
Policy Loans 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Amortization (81.6) (94.5) (100.8) (122.0) (143.2) (105.9) (152.9) (108.1)
Divestment 0.0 189.0 0.0 0.0 0.0 0.0 0.0 0.0
Total Financing
315.1 163.9 124.1 257.1 128.0 125.7 454.9 564.6
Sources: Accountant General and Central Bank of Barbados
P: Provisional
Debt and debt service
The projected costs of servicing the Government's external debt appear to be well within the
economy's capacity, based on projected inflows from exports of goods and services. Interest
costs are forecast to be less than 5% of inflows in 2010, and the percentage declines
thereafter. Amortisation costs rise to a forecast 8.5%, with the repayment of the US$100
million bond in June 2010, falling to less than 4% in subsequent years. The interest costs of
servicing total government debt are projected to rise to 18.2 percent of revenue in 2010,
declining gradually thereafter. The ratio of government debt to GDP rose from 90.8 percent in
2008 to 110.2 percent at the end of 2009. However, approximately 25% of this amount is
held by NIS. Net of NIS holdings, the government debt to GDP ratio is 82.7%.
Figure 15: External debt service projection
Figure 16: Interest payments projections (in BDS$ millions and as a % of Government
revenue)
Balance of payments
During 2009, the NIR registered an increase of $143.7 million, following a $190.6 million
falloff in 2008, raising the import cover from 16.6 weeks of goods and services to 20.7 weeks.
However, in the absence of the bond issue in Trinidad and Tobago and the new allocation of
SDRs, the NIR would have fallen $258.5 million. The factors responsible for the erosion in
earned foreign reserves included lower tourism earnings and a fall-off in merchandise
receipts. However, a fall in import payments, largely due to the decline in oil prices, served to
narrow the current account deficit to 6.9% of GDP, from 11.9% in 2008. Net private capital
inflows slumped by $247.4 million, as project financing was considerably lower in than in
Figure 17: Net international reserves and import cover
$ m
1,800 30.0
1,600
25.0
1,400
1,200 20.0
1,000
15.0
800
600 10.0
400
5.0
200
0 0.0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
NIR (left hand axis)
Weeks of imports of goods & services (right hand axis)
In 2010, the external current account deficit is projected to be slightly wider than that of 2009
owing primarily to a pickup in retained imports, as international oil and other commodity
prices, as well as interest costs on external debt are projected to rise. Furthermore, travel
credits are anticipated to be slightly down compared to 2009.
Figure 18: Capital and financial net inflows
$ M
2000
1500
1000
500
0
-500
-1000
-1500
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Long-term Public Long-term Private Other Short-term Capital and Financial Account
It is expected that there will be a pick up in project fund inflows during 2010. The continuation
of real estate developments at Apes Hill, Lime Grove, St. Peter's Bay and the Four Seasons
Resort, as well as new ventures such as Port Ferdinand and Beachlands should provide an
increase of foreign financing. However, outflows will increase with the repayment of a $200
million loan due in June 2010. Total financing is not expected to be sufficient to fully finance
the anticipated external current account deficit in the absence of new borrowing.
Consequently, the NIR is projected to decline somewhat in 2010, and the foreign reserves
cover may revert to the levels of 2008.
Table 8: Balance of payments ($ millions)
R R R R R R
2004 2005 2006 2007 2008 2009
Current Account -532.8 -733.5 -498.5 -356.4 -843.0 -456.6
Travel Credits 1,668.8 1,792.2 2,113.3 2,377.3 2,388.7 2,148.9
Domestic Exports 346.9 422.1 497.1 522.3 531.2 457.5
Retained Imports 2,616.3 2,911.0 2,866.9 2,958.2 3,396.0 2,631.0
Income (net) -163.8 -255.4 -283.3 -132.9 -242.6 -280.1
Current Transfers (net) 228.9 130.9 165.7 112.1 93.6 84.6
Capital and Financial Account 467.3 631.9 695.9 923.6 348.1 623.4
Long-term 84.6 313.1 1028.8 1573.8 242.3 436.1
Public -54.6 217.0 82.1 23.6 -99.7 341.6
Private 139.2 96.1 946.7 1550.2 342.0 94.5
Other 30.4 27.6 89.2 220.4 -69.1 227.0
Short-term 352.2 291.3 -422.1 -870.6 175.3 -39.7
Errors and Omissions -275.1 -36.5 -114.8 -10.6 -3.3 10.8
Overall Surplus (+)/ Deficit (-) -340.6 -138.1 82.6 556.6 -497.8 177.6
Change in Foreign Reserves
(-increase/+decrease) (CBB basis) 340.6 138.1 -82.6 -556.6 497.8 -177.6
Adjusted by commercial banks' position (Net) -27.7 -184.2 125.1 202.6 -307.2 33.9
Change in Net International Reserves (NIR) 312.9 -46.1 42.5 -354.0 190.6 -143.7
(IMF basis) (-increase/+decrease)
Source: Central Bank of Barbados and Accountant General
Statistical appendix:
Table 9: Summary of Government operations ($ million)
2002 2003 2004 2005 2006 2007 2008P 2009P
1,712.2 1,843.8 1,895.6 2,021.1 2,278.5 2,440.6 2,473.8 2,461.6
Total Revenue
Tax Revenue
1,585.0 1,724.4 1,812.7 1,888.9 2,176.0 2,307.2 2,332.6 2,259.9
Direct Taxes
691.4 731.1 739.5 766.8 959.2 1026.2 981.4 1,095.7
Personal 338.1 329.0 312.6 295.7 310.3 325.3 335.3 397.1
Corporate 198.5 250.1 258.9 294.3 430.9 499.8 425.6 457.8
Levies 17.5 4.7 0.0 0.0 0.0 0.0 0.0 0.0
Property 97.8 101.7 116.9 127.4 151.7 115.6 120.3 154.7
51.1
Other 39.5 45.6 49.4 66.3 85.5 100.2 86.1
Indirect Taxes
893.6 993.4 1,073.2 1,122.1 1,216.9 1,280.9 1351.3 1,164.2
Consumption 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
14.8 18.2
Stamp 10.9 20.8 25.1 24.7 19.4 13.1
VAT 502.5 548.8 603.2 609.9 704.6 792.5 817.5 669.3
Excises 113.4 135.4 137.1 172.4 175.7 157.2 162.7 144.8
Import Duties 162.5 170.6 201.0 191.7 188.6 194.3 212.7 179.8
103.0
Other 123.6 113.7 127.4 122.9 112.2 138.9 157.2
Non-Tax Revenue & Grants 127.2 119.4 82.9
132.2 102.5 133.4 141.2 201.7
110.6 102.7
Non-Tax Revenue 64.5 109.8 82.2 107.6 108.6 181.4
Grants 0.0 0.0 0.0 0.0 0.0 4.0 7.5 0.0
Post Office Revenue 16.6 16.7 18.3 22.4 20.3 21.8 25.1 20.3
Current Expenditure 1,671.0 1,736.2 1,804.4 1,959.0 2,038.3 2,324.9 2,641.0 2,742.5
Wages & Salaries 673.7 623.6 639.1 676.0 694.1 797.6 783.7 872.2
Goods & Services 217.4 201.8 204.8 241.3 243.8 311.3 387.2 434.3
Interest Payments 267.6 271.8 272.1 291.0 324.3 314.2 394.7 305.9
External 113.3 105.2 114.2 106.1 121.4 111.9 148.8 92.5
Domestic 154.3 166.6 157.9 184.8 202.9 202.4 245.9 213.4
Transfers & Subsidies 512.3 638.9 688.4 750.8 776.1 901.7 1075.4 1,130.1
41.2 107.7 91.9 62.1 240.2 115.7 (167.2) (280.9)
Current Account Balance
Capital Expenditure and
Net Lending 356.3 272.1 215.2 319.2 368.2 241.4 286.8 283.8
Capital Expenditure 355.2 270.5 213.5 233.4 267.6 203.2 248.6 245.6
Net Lendin 1.2 1.6 1.7 85.8 100.7 38.2 38.2 38.2
Total Expenditure and Net
Lending
2,027.3 2,008.3 2,019.6 2,278.2 2,408.0 2,566.0 2,927.8 3,026.3
Fiscal Balance
(315.2) (164.5) (124.4) (257.1) (129.5) (125.7) (454.9) (564.6)
Fiscal Balance to GDP (%)
(6.4) (3.1) (2.2) (4.3) (2.0) (1.8) (6.4) (8.4)
Table10: Summary accounts of the banking system ($ million)
2005 2006 2007 2008 2009P
Net International Reserves 1,607.7 1,691.2 2,247.7 1,749.4 1,929.3
Monetary Authorities 1,235.7 1,194.1 1,548.0 1,356.9 1,503.0
Commercial Banks 371.9 497.1 699.7 392.5 426.3
3,587.3 4,085.9 4,340.7 5,006.4 5,112.7
Net Domestic Assets
Credit to public sector 380.8 337.1 452.1 516.9 590.7
Central Government (net) 650.5 433.1 533.6 732.8 805.0
Other Public Sector -269.7 -95.9 -81.5 -216.0 -208.2
Credit to Rest of Financial System 312.9 343.2 482.1 477.9 659.3
Liabilities to Other Financial Institutions -516.2 -631.9 -925.4 -808.8 -692.2
Credit to Non-Financial Private Sector 3,791.8 4,292.9 4,513.5 5,010.9 5,070.2
Liabilities to the Non-Financial Private Sector 5,195.0 5,777.1 6,588.3 6,755.8 6,876.1
Demand Deposits 1,563.3 1,794.7 2,004.8 1,978.1 1,892.9
Time Deposits 491.1 552.7 763.9 713.5 590.4
Savings Deposits 2,692.1 2,964.7 3,327.6 3,584.2 3,900.1
Currency in Circulation 448.6 465.0 492.1 479.9 492.7
Source: The Central Bank of Barbados
P: Provisional