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 barbad

a grinding halt, leaving governments and businesses scrambling to stay afloat. central banks in the region had to take swift action to ensure liquidity in the financial system, lower interest rates, and support government stimulus efforts. but the pandemic highlighted an ongoing challenge : our financial systems are vulnerable to global crises, and the lack of diversified economies in the region makes recovery more difficult. regulators must therefore constantly balance the need to maintain stability, while responding to these shocks in an agile and effective manner. navigating the new financial landscape but this is not the only challenge facing us as regulators, as the financial landscape is also evolving rapidly. the rise of fintech, digital currencies, and shadow banking, has created new opportunities for financial inclusion and innovation. however, it also presents new risks. digital currencies, while offering the potential for greater financial inclusion, bring concerns about regulatory oversight, cybersecurity, and monetary policy 2 / 6 bis - central bankers'speeches transmission. caribbean countries have been the pioneers in developing digital currency frameworks, but it still requires careful consideration of the impact on financial stability. shadow banks – non - bank financial intermediaries that provide similar services as traditional banks – such as payday lenders or firms offering " buy now, pay later " options for buyers, are another concern. given that these entities generally operate outside the regular regulatory framework, they are often opaque, and central banks may lack the tools to properly oversee their activities. they can, therefore, pose systemic risks without the safeguards that apply to the formal financial sector. if these institutions fail, the resulting financial contagion could spread quickly throughout the economy. developing effective regulatory frameworks for shadow banks is therefore critical to ensuring financial stability in our region. the value of financial stability reports it is against this backdrop that caribbean central banks face the herculean task of monitoring, assessing, and mitigating these risks. one of the key tools at their disposal is macroprudential policy, which is still in its initial stage of implementation in most caribbean economies. however, central banks have made significant improvements in communicating the risks to the public via their financial stability reports ( fsr ). these fsrs, as you all know, provide a comprehensive assessment of the financial system's health and highlight any emerging vulnerabilities. however, preparing a comprehensive fsr is a very challenging exercise, especially in the caribbean context. one of the most significant challenges is the lack of