. however, projections for 2008 are for only a modest slowdown in the rest of the region. ( charts 3 and 4 ) of course, in most economies, both developed and developing, the rapid increase in international food and other commodity prices is being reflected in an unwelcomed return to a high inflation environment. in the caribbean, for instance, inflation has moved from an average of around 5 per cent in 2002 - 2006, to 6. 8 per cent in 2007, and is expected to reach close to double digits in 2008 ( charts 5 and 6 ). some countries are doing worse than others ( on the inflation front ). in jamaica, for instance, headline inflation for the 12 - month period ended march 2008 was 20 per cent ; here at home, our latest data show headline inflation at 10 per cent and an imf mission that just left barbados projected a rise in inflation to 9 per cent this year from 4 per cent last year. inflation in the eccu which generally hovered at around 2 - 3 percent is now around 6. 1 per cent ( chart 6 ). against this background ( and allowing for the inflation surge ), the question that i would like to pose is, why are the global economic conditions not putting a greater damper on the region? i can point to three main factors : • the first, is the on - going shift to a multi - polar world with the reduced reliance on the united states as the engine of the global economy. in fact, there is an interesting paradox here... and it is that the us downturn would be a lot steeper but for the resilience of some of the emerging market and developing countries. it is the export sector and the depreciation of the us dollar that is maintaining some momentum in the us economy. the multi - polar world is relevant to the resilience of the regional economies in several ways : 1. as you know, many countries in the caribbean are heavily dependent on tourism … what has happened in the region over the past few years is that there has been a geographical diversification in the source of tourist arrivals – with the us share declining and that of europe increasing, due in part to the strengthening of the british pound and the euro, ( charts 7 and 8 ). the statistics also suggest that tourism from trinidad and tobago to the rest of the region has increased markedly, helping to offset any global slowdown. 2. because of the strength of the export sector in the us,

an increase in their population reduces total national savings and pushes interest rates up. on the other hand, if population aging is accompanied by an increase in longevity, this will positively affect savings. since world war ii, longevity has been increasing in developed countries through advances in medical technology, and we are now likely to live longer than our parents and grandparents. therefore, even if the proportion of elderly people increases, they may spend less than before or work longer to earn income, both of which will contribute to pushing interest rates down by reducing spending or by increasing savings. how about the impact on investment? a declining and aging population can again either increase or decrease investment, although this also depends on the prospects for the economy and technological progress. a decrease in working - age population and thus in labor input raises the level of capital stock per labor input, and makes capital input relatively abundant. 2 this reduces the need for additional investment. investment is also reduced when firms expect that the population, and therefore the future demand for production, will decline. these are the factors that push interest rates down. meanwhile, when technological progress or labor - saving investment is prompted to compensate for decreased labor input, this pushes interest rates upward. in this way, a declining and aging population can either push up or push down interest rates. recent studies suggest that the equilibrium real interest rate in the medium to long run is on a decreasing trend in advanced economies, and a declining and aging population has contributed to this trend to some extent. 3 based on the discussion so far, we can assume that a declining and aging population is likely to increase savings, or decrease investment, or both, at least for the time being. 2 the situation where the level of capital stock per labor input increases is referred to as " capital deepening. " 3 sudo and takizuka ( 2018 ) suggest that about 270 out of the 640 basis points decline in real interest rates over the past 50 years in japan can be attributed to demographic changes. sudo, n. and y. takizuka " population aging and the real interest rate in the last and next 50 years, " bank of japan working paper series 18 - e - 1, 2018. ii. impact on banking business since inflation expectations in advanced economies have moved around a small positive value with some variations across countries, a decreasing trend in the equilibrium real interest rate is translated into a decreasing trend in nominal interest rates. let me now turn to how the demographic changes accompanied by a decreasing trend in nominal