charts 12 and 13 ) let me stress that while the direct spillovers from the global financial turmoil to the regional economies appear to have been contained so far, i am by no means suggesting that the region will not feel greater effects as time goes by. borrowing from the new jargon, i do not believe that the region ( as indeed, most developing countries ) has de - coupled or will continue to be relatively un - affected by the global turmoil. as i noted earlier, growth in the regional economies will be slower than the average for the past few years, largely because of the financial turmoil and some related factors such as the soaring international oil prices. moreover, policy makers throughout the region will concede that their economies are facing increased uncertainties and major risks. there is no doubt that a protracted and deep us downturn combined with a slowdown in the eu, will surely affect tourism and remittances and other regional exports. the impact of this could be compounded by monetary tightening to address inflationary pressures. in turn, a sharp regional growth slowdown could threaten the stability of the financial system. so we are not out of the woods. what does all this mean for us in terms of economic management? because of the uncertainty, countries in the region should : ( i ) further consolidate their fiscal positions. given trinidad and tobago ’ s fortunate reserve endowment there is a strong case for increasing national savings. ( ii ) continue to reduce their public debt, particularly foreign debt. our external debt is pretty low and we should try to keep it that way ; and ( iii ) continue to improve its regulatory standards and adopt international best practices in all areas – in accounting, auditing, transparency etc. as i said, we are not yet out of the woods. chart 1 international oil and gas prices natural gas - henry hub ( right axis ) us $ / bbl oil - wti ( left axis ) us $ / mmbtu chart 2 real gdp growth – selected caribbean economies ec currency union 2008p jamaica bahamas barbados per cent chart 3 growth in the caribbean and advanced economies per cent united states euro area caribbean chart 4 recent changes to growth outlook current projections difference from january 2008 projections world 4. 9 3. 7 3. 8 - 0. 5 - 0. 6 advanced economies 2. 7 1. 3 1. 3 - 0. 6 - 0. 8 emerging and developing economies 7. 9 6. 7 6. 6 - 0. 2 - 0. 4 caribbean 4.

this recession or this slowdown ( however you call it ) has not been as costly in terms of employment ( at least not yet ) as in previous recessions. and because of this, there has not been a sharp decline in emigrants remittances as was previously expected. ( these remittances are an important source of domestic demand and foreign exchange earnings for many caribbean countries. i think in jamaica remittances are the major source of foreign exchange earnings ). ( so this is the global re - balancing effect. ) • a second factor that has contributed to the insulation of the region from greater contagion has been the improved strength of the regional financial sector. it is now certain that banks in the region have not been directly affected by the subprime crisis, because they have not held any of these assets and because their lending operations have been based on the growth of deposits rather than on borrowing from foreign banks. ( the credit crunch partly resulted from the fact that banks were no longer willing to lend to each other because they were worried about the extent of possible losses from us sub - prime mortgage backed securities. ( this has not been an issue in the region. ) more fundamentally however, since the jamaican financial crisis of the late 1990 ’ s, the regional banking system has gone through a period of consolidation and strengthening, reflected in the increase in capital and a sharp reduction in nonperforming loans ( chart 9 ). this meant that banks were in a position to continue lending and supporting domestic activity even in an environment of tight global liquidity ( chart 10 ). • another important financial plus for the region is this. previously, when global liquidity dried up, caribbean countries were shut off from international funding and this impacted productive investment and sometimes forced cutbacks in government expenditure. what has changed is that, now the regional governments as well as regional corporations that have been shut out of the global markets have turned to the trinidad and tobago capital market for financing and in that way, have been able to maintain investment spending ( chart 11 ). • a third factor that explains the better resilience of the regional economies is the fact ( perhaps not sufficiently recognized ) that macro - economic management has improved markedly in regional economies over the last several years. this is reflected in some of the main economic parameters. fiscal deficits have been reduced ; public debt has declined ; and net international reserves have risen sharply. all these factors have increased the resilience of regional economies. (