important contribution to make to the national development of barbados. by your actions you recognise that there are persons in our society who need a helping hand. these are persons who, because of circumstances into which they were born or through personal misfortune, are unable to enjoy the quality of life to which we all aspire. just as the island is susceptible to natural catastrophes, including hurricanes because of our geographical location, so too are these persons especially vulnerable to the economic shocks that confront us from time to time. as a country, however, we have to ensure that we have mechanisms to help such persons. protecting the less fortunate in society is a must as we seek to create economic opportunity and avoid serious social and economic displacement, dislocation or disruption. this is true everywhere and various world leaders including mahatma ghandi, jimmy carter and pope francis have spoken eloquently about the importance of a society looking after its most vulnerable members. indeed pope francis notes that “ it is not enough to offer someone a sandwich unless it is accompanied by the possibility of learning how to stand on one ’ s own two feet. charity that leaves the poor person as he is is not sufficient. true mercy, the mercy god gives to us and teaches us, demands justice, it demands that the poor find the way to be poor no longer. ” every post - independence government in barbados has espoused the tenet of protecting the vulnerable and has demonstrated adherence by making the provision of social services and the maintenance of the basic social safety net a priority. it is no secret that barbados currently faces economic challenges. indeed, government ’ s recent budgetary measures, by their sheer magnitude, represent a substantial fiscal adjustment effort that seeks to restore macroeconomic stability, engender confidence and place the economy on a sustainable growth path. as an import - dependent country, foreign exchange is critical to sustain economic activity. unfortunately, the foreign reserves have fallen below the levels to which we have become accustomed in the recent past, raising concern among the public about the trajectory. this situation is reversible but increased foreign exchange inflows together with a dampening of demand for foreign exchange are now needed. at the same time, the taxes we collect to finance public services and facilitate the distribution of resources to the less fortunate have historically been less than necessary to meet the costs of public administration, social services and infrastructure development. education, health, sanitation, public housing and public transportation are all delivered to the public at below costs

will continue to improve, but that recuperation will require some time. as all that happens, the policy easing the federal reserve has put in place over recent months will begin to show through more in reductions in the cost of capital and the greater availability of credit. the demand for housing is not likely to rebound substantially for a while after this episode, but the drag on growth from declining activity and prices in the housing market will ebb as excess inventories are worked off and affordability improves. consumption should pick up along with the improvement in jobs and income, though a gradual increase in the saving rate would be expected now that households will no longer be counting on increases in the value of their homes to finance retirement or other future spending. with a lag, business investment should turn up as prospects for a sustained expansion of economic activity become clearer. and both households and businesses should benefit from a leveling - off in the prices of energy and other commodities along the path implied by futures markets. as with any forecast, mine is subject to a number of uncertainties. one is the extent of the housing correction ahead of us. if the retrenchment in house prices becomes deeper than anticipated, its effect on lenders and financial markets could further damp overall economic activity. we are in uncharted waters when the financial system becomes so disrupted, though we should consider ourselves fortunate that we have very few similar historical episodes on which to base our judgments. in such circumstances, uncertainty about how credit conditions will evolve and how businesses and households will react to changing terms and conditions means that we can have even less confidence than usual in our economic forecasts. inflation another area of concern is the implications for inflation as a result of the recent run - up in the prices of energy, food, and other commodities. the recent news on inflation has been mixed. core inflation has moderated a little so far this year. however, we have seen no relief from the pressures of rising prices for energy and food ; thus headline inflation has been quite elevated. these prices have continued to rise despite slowing demand in the united states and, to a lesser extent, in other countries. over the past few years, emerging market economies have increased demand for many of these commodities, and world supply has not kept pace with this growing demand. for oil, non - opec production, particularly in the north sea and in mexico, has proved disappointing, and opec production has remained restrained. as for food prices, bad weather has combined