Central Bank of Barbados ECONOMIC REVIEW Vol. XXXIV No. 2

Document Sample
Central Bank of Barbados ECONOMIC REVIEW Vol. XXXIV No. 2 Powered By Docstoc
					              Central Bank of Barbados
              ECONOMIC REVIEW
              Vol. XXXIV No. 2
              September 2007


Publisher’s Note                                                       
Economic Review (To the end of June, 2007)                             1

Secton 1        Overvew                                              1
                 Producton, Prces and Employment                     2
                 Fnancal Sector                                      4
                 Publc Sector                                         7
                 Foregn Trade and Payments                            9
                 Regonal Economc Developments                       12
                 Internatonal Economc Developments                  14

Secton 2        Regonal and Internatonal Captal Markets           17

Secton 3        Trade Update                                         23

Book Review      Buldng the Economc Reslence of Small States,
                 Edted by Lno Brguglo, Gordon Cordna and
                 Elawony J. Ksanga
                 — Andre Burgess                                      25

Publisher’s	Note

        The Economc Revew s publshed three tmes a year n June, September and
December, by the Central Bank of Barbados. It s prepared by the Bank’s Research
Department and contans artcles of research undertaken at the Bank. In addton,
we welcome contrbutons of a non-techncal and emprcal nature on economc and
polcy ssues n the Carbbean. Book revews and surveys are also welcome. All
submtted papers are revewed by the Edtoral Commttee* and external referees.

       Artcles and correspondence regardng the Revew should be addressed to:

               The Admnstratve Edtor
               Economc Revew
               Central Bank of Barbados
               P.O.Box 1016
               Tel: (246) 436-6870
               Fax: (246) 427-1431

	      *The	Editorial	Committee
       Dr. Danel Boamah
       Mr. Harold Codrngton
       Dr. Roland Cragwell
       Dr. Kevn Greendge
       Mr. Carlos Holder
       Dr. Denny Lews-Bynoe
       Mr. Peter Whtehall
       Mr. Nevlle Pollard, Administrative Editor 		

                Economic	Review
                (To the end of June 2007)                                                                             Section	1

Overview                                                            produced were both sluggsh. The average unemployment
                                                                    rate for the first quarter fell marginally. In addition, the
         The Barbados economy grew by approxmately                 inflation rate declined moderately, largely reflecting lower
4.5% during the first half of 2007, compared to an increase         prces for housng and transportaton.
of 3.7% n the correspondng perod of 2006. The expanson                   Durng the sx-month revew perod, the reducton
in real GDP reflected primarily the continued robust                in the external current account deficit was mainly attributed
performance of the non-traded sectors and a moderate                to hgher estmated travel credts, whch offset the ncrease
toursm outturn. Despte strong non-traded sector led               n retaned mports and the contracton n domestc exports.
growth, hgher estmated recepts from the upturn n                In addition, healthy net long-term capital and financial
toursm actvty n the second quarter contrbuted to a lower       inflows, both for the public and private sectors, resulted
external current account deficit. The improved external             in a surplus on the capital and financial account, which
current account combined with significant net long-term             was twice the surplus recorded in the first half of 2006.
capital and financial inflows boosted the foreign reserves          Consequently, for the first six months of 2007, the net
of the monetary authorities. These inflows strengthened             nternatonal reserves (NIR) of the monetary authortes
the level of lqudty n the bankng system, manfested            rose by $262.3 mllon, n contrast to a reserve loss of
n strong growth n bank deposts amd a slowdown n                $69.1 mllon n the comparable perod of 2006.
new bank lending. Government incurred a sizeable fiscal                      Durng the January-to-June perod of 2007,
deficit, the majority of which was financed by domestic             there was an ncrease n excess lqudty n the bankng
lenders.                                                            system, followng two years of tght lqudty condtons.
         Non-traded sector actvty rose by an estmated            The build-up of excess liquidity reflected higher levels
5.2%, drven manly by wholesale and retal, busness               of capital inflows as well as a sharp expansion in bank
and other servces and constructon. The hve of busness           deposts, relatve to new loans from commercal banks, an
actvty assocated wth the preparaton and the subsequent         indication of the effect of the tighter monetary and fiscal
stagng of the Crcket World Cup (CWC) matches                      measures mplemented snce 2005.
contrbuted to growth n these sectors. Output n the                        Prelmnary estmates ndcate that after
traded sectors grew by 2.5%, fuelled chiefly by tourism,            experiencing a surplus of $3.9 million for the first half of
whle manufacturng output and the amount of raw sugar              2006, the Government incurred a deficit of approximately

                 Real	GDP	Growth	Rate                                        Change	In	Net	International	Reserves
                      (January – June)                                                    (January – June)

$100.1 mllon for the correspondng perod of 2007. The            by the desre to watch nternatonal crcket. Vstor arrvals
deficit occurred mainly because of a comparative slowdown           from the rest of the world more than doubled when
n the collecton of tax revenues, and the contnued                compared to the correspondng perod of 2006.
expanson n current expendture whch was slghtly offset                   In contrast, vstors from Germany and CARICOM
by lower captal outlays.                                           declned by 32.0% and 20.9%, respectvely. Hgher arlne
                                                                    fares appeared to have negatvely affected travel from the
Production,	Prices	and	Employment                                   regon, as persons travellng from Trndad and Tobago
                                                                    and other CARICOM both contracted by 8.4% and 25.9%,
Tourism                                                             respectvely, after these markets had regstered consstent
         During the first six months of 2007, tourism output        growth for the past five years.
rose by an estmated 3.1%, up from an ncrease of 1.1% for                   The number of cruse shp passengers grew
the correspondng perod n 2006. The moderately hgher             by 13.7% during the first six months of the year, partly
expanson n toursm actvty may be attrbuted n large            reversng the declne of 17% recorded n the smlar perod
part to the influx of visitors for the CWC matches held in          last year. The outturn reflected a 5.3% increase in cruise
the second quarter. Compared to smlar perods last year,          shp calls, as addtonal vessels were used as temporary
tourst arrvals ncreased by 13.6% n the second quarter,          accommodaton for vstors throughout the CWC event.
following a 6.8% falloff in the first quarter. The surge in
vstors was manly from non-tradtonal markets.
         Notwthstandng the spke n vstor arrvals n
the second quarter, the total number of long-stay toursts
increased by 2.7% during the first six months, which was                         Cruise	Ship	Passenger	Arrivals
lower than the overall growth rate of 4.6% for the comparable                              (January - June)
perod n 2006. Arrvals from the tradtonal markets of
the Unted Kngdom (UK), Canada and the Unted States
expanded by 5.6%, 3.9% and 2.3% respectvely, despte
beng faced wth hgher costs for ar travel. In partcular,
UK toursts rose by 14.5% n the second quarter, spurred

               Long-Stay	Tourist	Arrivals
                      (January - June)
                                                                             Manufacturng output declned margnally durng
                                                                    the revew perod, n contrast to an ncrease of 1.7% n the
                                                                    smlar perod of 2006. The lacklustre performance was
                                                                    prmarly the result of the sharp reductons n the producton
                                                                    of electronc components (17.8%), garments (9.8%) and
                                                                    non-metallc mneral goods (5.7%), whch outweghed
                                                                    the moderate gans n chemcals (6.6%), beverages and
                                                                    tobacco (14.8%) and wooden furnture (0.6%).
Agriculture and Fishing                                             to average half-yearly growth of 8.9% for the last two
         During the first half of 2007, the amount of sugar         years.
produced was estmated at 38,850 tonnes, approxmately                      Output of electrcty, gas and water rose by 4.3%,
0.6% or 200 tonnes hgher than the comparable producton            compared to an increase of 6.5% in the first half of the
figure for the first six months of 2006. Non-sugar                  prevous year, n lne wth the general expanson of the
agrculture s estmated to have also expanded, by around           economy. The producton of natural gas declned by 15.8%
6.3%, surpassng the margnal performance for the smlar           durng January-to-June 2007, n contrast to an ncrease of
period in 2006. Milk production rose by 5.1%, the first             10.7% in the similar period of 2006. Over the first two
half-yearly ncrease for the past sx years. The producton         quarters of 2007, total consumpton of electrcty grew by
of chcken and other meats went up by 8.8% and 1.2%,                4.7%, compared to a rse of 1.6%. In the same perod of
respectively, following first half-yearly expansions of             2006 commercal and resdental usage expanded by 5.0%
3.0% and 5.8% n 2005 and 2006 respectvely. In addton,           and 4.2%, respectvely, whle the electrcty for general
fish catches increased by 23.3%, in contrast to an average          servces surged by 10.5%, caused by addtonal street
decrease of 13.9% in the first six months of the last two           lghtng n the revew perod. The depleton of exstng
years.                                                              onshore ol wells underpnned the 16.7% reducton n ol
                                                                    producton. Ths outcome constraned mnng and quarryng
International Business and Financial Services                       output, resultng n a declne of 1.2% n the January-to-
         Between January and June of 2007, three hundred            June 2007 perod, whch contrasts wth margnal growth n
and five new licences were issued, compared to two hundred          the smlar perod of 2006.
and eghty-nne lcences granted n the smlar sx-month
period of 2006, marking the highest first-half increase in          Prices and Employment
new lcences ssued snce 2000. Two hundred and eght new                   At the end of June 2007, the 12-month movng
lcences were granted to nternatonal busness companes,          average rate of inflation was 5.5%, about 1.7 percentage
28 more than the number recorded for the smlar perod             ponts lower than the rate at the end of June 2006. On
of 2006. Nnety-two lcences for socetes wth restrcted          a pont-to-pont bass, the percentage change n prces
lablty were approved durng the revew perod, more
than doublng the 40 ssued durng the same perod last
year. Permsson was granted for two offshore banks to
commence operatons. Four exempt nsurance companes
acqured lcences, but no new lcences were approved for                                    Inflation
exempt insurance management companies during the first                                     (Quarterly)
sx months of 2007.

Non-Traded Sectors
        The robust performance of the non-traded sectors
continued to fuel economic growth during the first two
quarters of the year. The man sources of the expanson
n non-traded actvty were wholesale and retal trade, and
busness and other servces, whch rose by 6.3%, and 5.8%,
respectvely. In addton, actvty n the transport, storage
and communcatons sector went up by 6.5%. Value-added
n constructon expanded by an estmated 5.2%, compared
moved from 7.8% at the end of June last year to 3.6% at
the end of June 2007. The contraction in the inflation rate                          Liquid	Asset	Ratio
largely reflected the slowdown in the growth rate of prices                               (Quarterly)
for housng and transportaton, whch fell from 11.7% to
8.8% and 10.3% to 0.2%, respectvely. The rate of ncrease
n the prces for fuel and lght also declned from 11.3%
to 1.9%. The total inflation rate is being driven by the
rsng growth rate of prces for food (from 6.5% to 8.0%),
alcoholc beverages and tobacco (from 2.9% to 4.3%), and
household operatons (from 4.4% to 6.8%).
         At the end of the first half of 2007, the average
unemployment rate was 8.1%, compared to a rate of 9.4%
at the end of June 2006. The unemployment rate for males
decreased from 7.8% to 7.1%, whle the rate for females           sector. The lqud asset rato at the end of June 2007
declned by 2 percentage ponts to 9.1%. The sectors              was estmated at 10.2%, up from 7.9% at the end of
                                                                  December 2006.
                                                                          During the first six months, excess reserves
                                                                  of commercal banks ncreased by $227.0 mllon to
                     Unemployment                                 $644.0 mllon, and the excess cash to depost rato rose
                        (Quarterly)                               from 0.6% at the end of December 2006 to 4.2% as at
                                                                  the end of June 2007. The hgher level of lqudty n
                                                                  the bankng system contrbuted to a declne of almost
                                                                  one percentage pont n the average dscount rate on 3-
                                                                  month Treasury blls to 5.74%.
                                                                          The tghter monetary stance adopted by the
                                                                  Central Bank over the past two years had some mpact
                                                                  on nterest rates at commercal banks durng the revew
                                                                  perod. At the end of June, the weghted average nterest
                                                                  rate on deposts was 5.2%, representng an ncrease of
                                                                  11 bass ponts from the rate at the end of last year, whle
                                                                  the weghted average rate on total loans and selected
recording increases in new jobs during the period under           loans fell by 21 and 37 bass ponts respectvely, to
revew were toursm, busness servces, transport and             10.66% and 9.41%, respectvely.
communication as well as finance.
Financial	Sector                                                           Credit to the non-financial private sector rose by
                                                                  2.9% or $123.3 million during the first six months of
Liquidity and Interest Rates                                      2007, compared to growth of around 6% or $223.5 mllon
        The accumulaton of lqudty n the bankng              n the smlar perod of 2006. The marked slowdown n
system durng the revew perod stemmed from robust               the rate of lendng by banks occurred manly because of
growth n domestc deposts, whch outpaced the rate of           lower borrowng by the personal sector, whch ncreased
new commercial bank lending to the non-financial private          by 5.1% or $109.2 mllon, after expansons of 8.2%
     Changes	in	Commercial	Banks’	Credit	to	the                         Between January and June of 2007, domestc
  Non-	Financial	Private	Sector	and	Domestic	Deposits           deposts at commercal banks grew by 9.9% or $653.2
                     (January – June)                           mllon, eclpsng the ncrease of 5.5% or $331.4 mllon
                                                                durng the smlar perod of 2006. Deposts of prvate
                                                                ndvduals, whch represented the bulk of the expanson
                                                                n bank deposts, rose by 6.4% or $227.2 mllon, whle the
                                                                depost holdngs of statutory bodes ncreased by 34.5% or
                                                                $56.1 million. In addition, financial institutions’ deposits
                                                                were up by $144.9 mllon, as both prvate and publc
                                                                financial institutions registered higher deposit levels. The
                                                                deposts of the central government fell by $4.6 mllon.

or $147.5 mllon and 10.7% or $156.5 mllon durng                   Treasury	Bill	and	Minimum	Savings	Rate
the first half of the last two years. Mortgage lending by                               (Quarterly)
commercal banks expanded by $199 mllon for the
first six months, which was considerably higher than
the ncrease of $95.1 mllon recorded for the smlar
perod of 2006. In addton, borrowng by statutory
bodes and the constructon sector declned, by 8.8%
and 3.4%, respectvely, compared wth last year. On
the other hand, commercal bank loans to dstrbuton
and the other servces sector were up by 2.9% and 4.5%,

                                               Summary	Accounts	of	the	Banking	System

                                                        2005                                          2006                             2007P

                                       Mar        Jun          Sep          Dec       Mar       Jun          Sep       Dec       Mar           Jun

 Net	International	Reserves       1,780.8        1,659.2   1,442.4        1,608.4    1,730.2   1,610.6   1,613.1      1,691.2   1,944.7    2,037.2
    Monetary Authortes          1,227.9        1,214.1   1,149.6        1,236.5    1,282.5   1,167.4   1,136.4      1,194.1   1,330.0    1,456.4
    Commercal Banks                   522.9      445.2        292.9        371.9     447.7     443.2        476.8     497.1     611.7         580.8

 Net	Domestic	Assets              3,121.3        3,370.3   3,656.2        3,584.0    3,527.1   3,801.2   3,984.0      4,085.9   3,983.3    4,200.2
    Credt to Publc Sector            508.4      528.8        625.0        380.4     164.5     331.0        387.6     337.1     161.2         274.1
    Central Government (net)           734.1      784.4        902.6        650.5     392.6     603.4        631.8     433.1     391.2         508.9
    Rest of Publc Sector          -226.0        -255.6        -277.8      -270.1    -228.1    -272.4        -244.2     -95.9   -230.0         -234.8

 Credit	to	Rest	of	
 	Financial	System                     260.5      298.4        301.8        312.9     344.1     261.9        339.7     343.2     454.3         359.5

 Liabilities	to	Other	
 	Financial	Institutions               453.3      475.4        417.2        515.0     551.3     558.7        565.4     597.4     700.7         693.3

 Credit	to	Non-Financial	
 	Private	Sector                  3,185.8        3,395.3   3,513.8        3,791.8    3,890.5   4,015.3   4,098.7      4,292.9   4,311.4    4,416.1

 Liabilities	to	the	Non-Financial	
 	Private	Sector                   4,902.7       5,029.5   5,098.5        5,195.0    5,257.3   5,411.9   5,597.2      5,777.1   5,928.0    6,337.4
    Currency n Crculaton            392.0      403.0        418.9        448.6     436.8     431.8        433.1     465.0     458.3         470.1
    Demand Deposts               1,548.0        1,576.5   1,604.3        1,563.3    1,530.9   1,515.6   1,672.2      1,794.7   1,780.1    1,861.7
    Tme Deposts                      343.8      352.4        405.1        491.1     556.0     625.3        584.6     552.7     672.7         784.3
    Savngs Deposts              2,618.5        2,697.6   2,670.2        2,692.1    2,733.5   2,839.2   2,907.2      2,964.7   3,016.9    3,121.3

    Domestc Deposts             5,638.8        5,763.0   5,832.4        6,019.4    6,112.9   6,350.8   6,494.3      6,586.7   6,953.5    7,239.9
    Lqud Foregn Assets         1,233.5        1,218.9   1,157.1        1,254.1    1,293.1   1,286.5   1,280.0      1,307.3   1,452.6    1,578.1
    Loans & Advances              3,429.7        3,630.2   3,788.9        4,081.8    4,240.5   4,382.3   4,469.5      4,713.7   4,871.0    4,857.5

Source: The Central Bank of Barbados
P: Provsonal

Government Securities                                                year. Value added tax (VAT) recepts declned by 2.8% and
         At the end of June 2007, the total amount of Treasury       excse taxes fell by 19.3%, after these categores grew by
blls outstandng was $585.8 mllon, approxmately $97.1            14.6% and 10.6%, respectvely n 2006. The contracton
mllon more than the amount outstandng at the end                  in the tax receipts reflects the recording of VAT and excise
of December 2006. The sum of Treasury blls held at                  tax collectons for 2005 n the 2006 revew perod, thus
commercal banks rose by $45.4 mllon as at the end of              makng the tax recepts for 2006 extraordnarly hgher.
June 2007, whle those held by other nvestors and trust             Revenues from stamp and mport dutes ncreased by
companes ncreased by $40.6 mllon and $7.1 mllon,               24.1% and 16.6%, respectvely, and other ndrect taxes
respectvely. At the end of June 2007, the nomnal value of          went up by 5.4%. Drect tax recepts were hgher by only
Barbados Government Savngs Bonds was $99.7 mllon,                 3.4%, compared to growth of 28.6% registered in the first
approximately $8.2 million below the figure of one year ago.         sx months of 2006. Ths resulted as Corporaton taxes
The total amount of outstandng debentures expanded by               grew by only 6.6%, compared to growth of 36.5% n the
$220.6 mllon to $2.6 bllon, wth the Natonal Insurance          first half of 2006. The receipts from personal income and
Scheme and nsurance companes purchasng approxmately              property taxes declned by 0.7% and 2.6%, respectvely.
$96.0 mllon and $32.8 mllon, respectvely, whle other
nvestors secured an addtonal $64.2 mllon compared to            Expenditure
$10 mllon durng the correspondng perod of 2006.                          Prelmnary estmates ndcate that total
                                                                     expendture grew by approxmately 9.7% to $1357.3
Public	Sector                                                        million for the first two quarters of the year, on par
                                                                     wth the rate of ncrease for the smlar perod of 2006.
Revenue                                                              Current expendture expanded by 10.7%, compared to a
         Prelmnary estmates ndcate that durng the              rise of 8.2% recorded last year. For the first half of 2007,
first six months of 2007, total revenue grew by 1.2% to              expendture on goods and servces and wages and salares
$1257.2 million, compared to growth of 15.1% in the first            ncreased by 33.4% (partly related to CWC expendture)
half of 2006. Tax revenue rose by 0.9%, n stark contrast
to the 15.8% ncrease n the January-to-June perod of last

                                                                                       Current	Expenditure
                                                                                           (January – June)

                       Total	Revenue
                       (January – June)

                                                              Government	Operations
                                                                  (January – June)

                                                                 2003          2004      2005      2006 P    2007P

 Total	Current	Revenue                                          987.8         1,051.0   1,078.7    1,241.8   1,257.2
   Tax Revenue                                                  921.7         1,006.2   1015.3     1,176.5   1,183.3
   Direct Taxes                                                 414.3           407.3     412.8      530.7     548.8
     Personal                                                   202.2           189.9     158.8      177.6     176.4
     Corporate                                                  161.7           155.7     198.0      270.2     288.1
     Leves                                                       4.7             0.0       3.4        0.0       0.0
     Property                                                    26.9            32.2      34.3       48.3      47.0
     Other                                                       18.8            29.5      21.8       34.6      37.4

    Indirect Taxes                                              507.5          598.9     602.5      644.9     634.5
      Consumpton                                                 0.0            0.0       0.0        0.0       0.0
      Stamp                                                       6.7            8.3      10.3       11.4      14.1
      VAT                                                       282.9          315.5     323.1      370.3     359.9
      Excses                                                    69.1          107.1     100.5      111.1      89.7
      Import Dutes                                              77.3          101.0     102.1       95.6     111.5
      Hotel & Restaurant                                          0.0            0.0       0.0        0.0       0.0
      Other                                                      71.5           67.0      66.4       56.5      59.4

 Non	Tax	Revenue	&	Grants                                        66.1           44.8      63.4       66.1      73.9

 Current	Expenditure                                            857.9          893.3     959.4     1,038.5   1,149.6
     Wages & Salares                                           318.5          316.2     328.1       346.0     378.1
     Goods & Servces                                           109.6          105.4     126.7       121.8     162.2
     Interest Payments                                          130.0          134.4     130.5       158.5     153.0
        External                                                 49.8           55.9      45.4        57.8      48.6
        Domestc                                                 80.2           78.5      85.0       100.7     104.5
     Transfers & Subsdes                                      299.7          337.2     374.1       412.1     455.9

 Current	A/C	Balance                                            130.0          157.7     119.3      203.3     109.3

 Capital	Expenditure                                            169.0          124.4     134.5      162.0     148.9

 Net	Lending                                                       0.2            1.6     28.6       37.3      58.8

 Total	Expenditure	&	Net	Lending                               1,027.0        1,019.3   1,122.4    1,237.8   1,357.3

 Overall	Balance                                                 (39.2)         31.7      (43.7)       3.9   (100.1)

Source: The Central Bank of Barbados and Accountant General
P: Provsonal

and 9.3%, respectvely. Transfers and subsdes expanded                     amortisation payments of $51.4 million and project fund
by 10.6%, partly reflecting defense spending related to the                  inflows of $2.3 million during the review period.
CWC. Interest payments decreased by 3.5%, n contrast
to an expansion of 21.5% in the first half of 2006. While                    Foreign	Trade	and	Payments
the rate of ncrease n current expendture was hgher than
last year, captal spendng declned by 8.1%, after rsng                   Current Account
by 20.5% in the first six months of 2006. The slowdown                                The external current account deficit for the first six
in capital spending reflected to a large extent the winding                  months of 2007 was estmated at $146.7 mllon, compared
up of some government-funded projects. During the six-                       to a deficit of $210.4 million for the same period in 2006.
month review period, project funds for Government grew                       The mprovement n the external account resulted from
by 7.7% or $2.3 mllon, compared to an expanson of                         the faster expanson (10.2% or $113.1 mllon) n travel
28.9% or $21 million in the first six months of 2006.                        credts, whch offset the ncrease n retaned mports and
                                                                             the contracton n domestc exports. Retaned mports
Financing                                                                    expanded by 4.7%, n contrast to a declne of 3.3% n the
        Government financed the bulk of its fiscal deficit                   January-to-June perod of 2006. Imports of consumer
domestcally. Fnancng from the Natonal Insurance                          goods rose by 8.7%, after decreasing by 12.1% in the first
Scheme and the Central Bank amounted to $96 mllon                          half of 2006. The main categories that showed significant
and $3.8 million, respectively. Net foreign outflows were                    ncreases were food and beverages (7.8%), pharmaceutcals
approxmately $49.1 mllon, the dfference between                          (25.4%), motor vehcles (10%) and other manufacturng

                                                              Government	Financing
                                                                 (January – June)

                                                                2003             2004            2005P           2006 P          2007P

 Domestic	Financing                                              37.5             (3.5)            80.6            20.3           147.4
   Central Bank                                                  38.3            (72.9)           (20.4)          129.2             3.8
   Commercal Banks                                              (9.3)            79.4              9.5           (85.6)           71.0
   Natonal Insurance Scheme                                     25.2             20.0            125.6            10.0            96.0
   Prvate Non-Bank                                               8.4             48.6            115.5            62.7           141.3
   Dvestment                                                     0.0              0.0              0.0            31.4             0.0
   Other Publc Sector                                            0.0             (1.5)             0.0             0.0             0.0
   Other                                                        (25.2)           (78.5)          (149.6)         (127.4)         (164.8)

 Foreign	Financing	(net)                                          1.6            (28.2)           (36.9)          (24.2)          (49.1)

   Captal Markets                                                0.0              0.0              0.0             0.0             0.0
   Project Funds                                                 37.2             16.0              7.9            28.9             2.3
   Polcy Loans                                                   0.0              0.0              0.0             0.0             0.0
   Amortsaton                                                 (35.6)           (44.2)           (44.7)          (53.1)          (51.4)
   Dvestment                                                     0.0              0.0              0.0             0.0             0.0
 Total	Financing                                                 39.8            (31.7)            43.7            (3.9)           98.3

Source: The Central Bank of Barbados and Accountant General
P: Provsonal

goods (9.9%). Imports of ntermedate goods also expanded             (whch ncludes goods such as orthopaedc applances and
by 5.0%, manly because of a 10.2% rse n constructon               other machnery and transport equpment) fell by 12.9%, n
materials. For the first half of 2007, imports of fuel grew by        contrast to an expanson of 61.9% durng the same perod
2.8%, followng a reducton of 6.1% n the correspondng              in 2006. Export categories registering significant increases
perod of 2006. Imports of captal goods decreased by                 were food and beverages and chemcals, whch grew by
3.9%, after an expanson of 14.8% n the smlar perod of            31.7% and 5.6%, respectvely.
                                                                      Capital and Financial Account
                                                                               The substantal estmated surplus of $580.1 mllon
                                                                      registered on the capital and financial account for the first
                                                                      half of 2007 was more than twce the surplus of $254.5
          BOP	Current	and	Capital	Accounts
                       (January - June)                               mllon recorded n the comparable perod of 2006. Durng
                                                                      the first two quarters of this year, net long-term public
                                                                      capital inflows amounted to $99.0 million, in contrast to
                                                                      net capital outflows of $20.1 million in the corresponding
                                                                      perod of 2006. The expanson n publc sector captal
                                                                      inflows mainly reflects proceeds from a bond issue on
                                                                      behalf of a statutory corporation in the first quarter. Net
                                                                      long-term private capital inflows registered for the first
                                                                      half of 2007 were $209.7 mllon, compared to $119.6
                                                                      million during the previous year. These inflows were
                                                                      earmarked principally for tourism-related projects and the
                                                                      purchasing of real estate. In addition, short-term inflows
                                                                      were $166.6 mllon, compared to $132.9 mllon n 2006,
                                                                      largely reflecting inflows of loans proceeds for the airport
                                                                      project and pre-shipment financing for the sugar harvest.
        Domestc exports contracted by 5.3%, after rsng                      At the end of June 2007, the avalable lqud
by 18.7% in the first half of 2006. This outturn resulted             reserves totalled $1,578.5 mllon, whch represented
prmarly from a drop of 52.7% ($12.9 mllon) n the                 approxmately 18.5 weeks of mport reserve cover for
exports of electronc components, a reversal from the                 goods and servces, compared to an mport cover of 15.6
growth of 53.4% ($8.5 mllon) n the correspondng revew            weeks estmated at the end of June 2006.
perod n 2006. In addton, the “all other goods” category

                                                              Balance	of	Payments
                                                                 (January – June)

                                                   2001        2002           2003       2004        2005        2006      2007

 Current	Account	Balance                            43.5         14.4            (8.4)     199.0       219.1      210.4     (146.7)
      Merchandse Trade                           (664.2)      (626.8)         (749.7)    (932.7)   (1,039.2)    (922.0)    (997.4)
      Total Exports (BOP Bass)                    244.7        210.9           231.9      239.6       324.1      424.80     439.9
 Domestic	Exports                                  200.9        180.1           184.7      187.9       227.3      269.7      255.5
      Sugar                                         44.0         37.7            41.0       44.9        44.0       39.2       37.3
      Electronc Components                         19.8         13.7            12.5       14.7        15.9       24.4       11.6
      Chemcals                                     21.5         20.9            20.4       20.1        27.4       29.1       30.7
      Food/Beverages                                44.5         44.8            41.1       40.3        58.0       49.2       64.9
      All Other                                     71.1         63.0            69.7       67.8        82.0      127.7      111.3
 Total	Imports	(BOP	Basis)                         969.6        889.5         1,036.9    1,229.4     1,387.6    1,400.2    1,490.7
      Retained Imports                             997.3        926.5         1,075.1    1,280.8     1,419.1    1,372.0     1437.4
      Consumer Goods                               403.2        388.2           412.8      495.2       571.7      502.4      546.1
      Captal Goods                                217.8        198.5           240.4      314.1       278.0      318.8      309.4
      Intermedate Goods                           372.8        336.5           418.5      465.8       564.2      543.9      575.5
      Mscellaneous Goods                            3.5          3.4             3.4        5.6         5.2        7.1        6.3
 Services	(Net)                                    712.5        666.3           775.3      789.9       898.1      909.5    1,051.6
      Travel Credts                               847.9        772.2           889.5      910.2     1,025.3    1,113.5    1,226.6
      Other                                       (135.5)      (105.8)         (114.2)     137.9       135.1      116.0      142.2
 Investment	Income	(net)                           (95.8)       (99.7)         (114.7)    (133.0)     (195.2)    (247.7)    (283.8)
 Transfers	(net)                                    91.0         74.6            80.7       76.8        97.2       49.8       82.9
 Capital	and	Financial	Account                      95.1        203.9           167.7      125.4       135.7      254.5      580.1
      Long Term                                    120.2        132.9           166.6      (68.9)      (39.8)      99.5      308.8
      Publc Sector                                  1.2        (25.5)           (4.5)     (64.4        (5.7)     (20.1)      99.0
      Prvate Sector                               119.0        158.4           171.1       (4.6)      (34.1)     119.6      209.7
      Other                                        (21.6)        (5.2)          (88.8)      26.7       (34.2)      22.1      104.8
      Short Term                                    (3.5)        76.2            89.9      242.4       141.2      132.9      166.6
 Errors & Omssons                                  5.8       (146.0)           58.9      220.0         4.0       42.0      162.7
 Balance for Official Financing                    144.3         72.3           218.2      157.3       (87.4)       2.1      596.1
      Official Financing (net)                       0.0          0.0             0.0        0.0         0.0        0.0        0.0
      IMF                                            0.0          0.0             0.0        0.0         0.0        0.0        0.0
      Other Fnancal Insttutons                   0.0          0.0             0.0        0.0         0.0        0.0        0.0
 Reserve	movements	(CBB	basis)
 (-Increase/+Decrease)                            (144.3)       (72.3)         (218.2)    (157.3)      87.4        2.1      (596.1)
 Change n NIR (IMF bass)
 (-Increase/+Decrease)                            (146.5)       (71.5)          (13.0)     25.1        (23.6)     69.2      (262.7)

Source: The Central Bank of Barbados and Accountant General

Regional	Economic	Developments                                       expanded by 3.8%, whle exports crops grew by 2.2%.
                                                                     Agrcultural output n Guyana regstered an ncrease of
Overview                                                             5.5%, whle n the OECS agrcultural actvty rose by
         Most regonal economes performed moderately                10.8%, n contrast to a declne n the correspondng perod
during the first three months of 2007. Preliminary data              in 2006. In particular, the OECS benefited from significant
suggest that economc actvty was drven prmarly                  growth n banana producton n St. Luca and Domnca.
by expansons n the toursm and constructon sectors.               Addtonally, cocoa and nutmeg producton n Grenada
In The Bahamas, however, toursm output contracted,                  expanded moderately.
while Trinidad and Tobago benefited from revenues
from the energy sector, despte regsterng lower crude              Construction and Mining and Quarrying
oil production in the first quarter of this year. Regional                     The constructon sector n Jamaca ncreased by
agricultural production expanded during the first quarter            7.0% n the January to March perod of 2007, as cement and
of 2007, while retail price inflation in most regional               constructon materals became more accessble, followng
terrtores moderated from the hghs last year. The Trndad         the cement shortages that occurred n the domestc market
and Tobago exchange rate remaned vrtually unchanged                durng 2006. In the OECS, constructon actvty contnued
durng the revew perod, but apprecatons n the Jamacan          at a fast pace, wth the completon of many nfrastructural
and Guyanese-US dollar exchange rates were recorded.                 projects in preparation for the staging of CWC matches.
                                                                     Constructon actvty n The Bahamas expanded at a slower
Tourism                                                              pace during the first three months of 2007, owing largely to
          Vstor arrvals n several regonal destnatons          the contracton n mortgage lendng for new constructon
declined during the first quarter of 2007 in spite of greater        and repair projects.
vsblty because of the CWC. Long-stay vstors travellng                   During the first three months of 2007, mining and
to Jamaca and The Bahamas both declned by 2.1% and                 quarryng output n Jamaca grew margnally, n contrast to
5.0%, respectvely, but the number of cruse passengers              a declne of 2.1% n the smlar perod of 2006. Increased
rose by 1.3% and 3.9%, respectvely. In the January-to-              producton of alumna (up by 0.6%) and of crude bauxte
Aprl 2007 perod, tourst arrvals to St. Vncent and the           (up by 4.1%) were regstered, the latter spurred by ncreased
Grenadnes and St. Luca also fell by 3.9% and 8.9%,                 capacty. In Trndad and Tobago, crude ol producton for
respectvely, n contrast to strong expansons n cruse             exports slowed by approxmately 17% to 5,839,283 barrels
passenger arrvals of 42.3% and 44.5%, respectvely. The             for the first quarter of 2007, mainly due to the technical
growth n cruse passenger arrvals resulted partly from the         problems that occurred at one of the major oil companies.
moderaton n fuel prces n the latter half of 2006. Durng         However, natural gas producton expanded by 12% durng
the first four months of 2007, Belize experienced growth of          the first three months of 2007, which bolstered revenues in
2.4% n long stay toursts and 8.7% n cruse passengers.            the energy sector.

Agriculture                                                          Prices and Interest Rates
        During the first quarter of 2007, regional                             In the first half of 2007, inflation in Trinidad and
agrcultural output mproved, after poor performances n             Tobago was estmated at around 7.3%, down from 8.3%
the comparable perods of the last two years. In Jamaca,            recorded at the end of December 2006, manly because of
favourable weather condtons and ncreased productvty,            lower food prices. The steady reduction in inflation since
stemmng from the rehabltatve farmng programmes                  2006 reflects the effect of tight monetary conditions and
mplemented snce Hurrcane Ivan, boosted agrcultural               the mproved avalablty of agrcultural produce durng
producton. Producton of crops for domestc consumpton             the first six months of 2007. The Central Bank of Trinidad
and Tobago mantaned the repo rate at 8.0% as at the end              as lendng to the prvate sector slowed. At the end of May
of June ths year. In Jamaca, the consumer prce ndex                2007, loans and advances to the prvate sector n Guyana
rose by 2.9% between the January-to-June 2007 perod,                  expanded by 3.5%, whch was on par wth the rate ncrease
whch was on par wth the rate of expanson n the smlar             n the comparable perod of 2006. Domestc deposts rose
period in 2006. The annualised inflation rate at the end of            by 5.7%, as remttances accounted for a szeable amount
June 2007 was estmated at 5.6%, as Jamaca experenced                of the deposts n the commercal banks. In Jamaca,
slght ncreases n the prce of food and drnk, housng,              credt to the prvate sector rose by 8.3%, compared to an
fuels and health care during 2007. Retail price inflation in           expansion of 4% in the first five months of 2006, owing
The Bahamas climbed to 2.4% during the first six months                prmarly to the expanson of credt to the constructon
of 2007, compared to 1.6% n the correspondng perod of               and tourism sectors. For the first quarter of 2007, total
2006, drven by the global effects of hgher ol and other             loans and advances n Trndad and Tobago expanded by
commodity prices. In Belize, the inflation rate expanded by            3.2%, compared to margnal growth recorded n the smlar
0.7% for the first quarter of 2007, compared to an increase            period of 2006, mainly reflecting the surge of 16.4% in
of 1.0% n the equvalent perod of 2006. The year-on-year             credt to the prvate sector. Total deposts grew by 5.4%
ncrease was largely on account of hgher prces for basc             during the first quarter of 2007, compared to an increase of
food tems, personal care, recreaton, educaton and culture           6.3% n the correspondng perod of 2006. Ths outcome
and household goods and mantenance.                                   was largely attributed to the significant slowdown in the
         During the first three months of 2007, the weighted           deposts of the prvate sector durng 2007.
average nterest rate on deposts advanced by 15 bass ponts
to 3.7% n The Bahamas. The weghted average loan rate                 Exchange Rates
firmed by 56 basis points to 10.35%, reflecting the impact                     Durng the January-to-June 2007 perod, the
of tght lqudty condtons for the earler part of the year.        Trndad and Tobago dollar remaned relatvely unchanged
In Jamaca, the overall weghted average lendng rate was              at TT$6.3510 per US$1.00, whle the Jamaca dollar rose
17.23% at the end of June 2007, a decrease from 17.59%                 by 7.9% to J$68.59 per US$1.00. The Guyana dollar
regstered at the end of 2006, owng to the downward trend             apprecated by 7% to G$203.240 per US$1.00.
over the past two years n prvate sector lendng rates. The
overall weghted average depost rate at the end of June               Government Operations
2007 was 4.99%, down from 5.35% at the end of June 2006.                        In Jamaica, there was a fiscal surplus of J$0.9
In addton, the Treasury bll rate declned from 11.60% at            billion during the first three months of 2007, around J$411.4
the end of December 2006 to 11.15% at the end of Aprl                 mllon less than was budgeted. In The Bahamas, the
2007. At the end of June 2007, the rate on ordnary savngs            overall fiscal deficit widened by B$10.8 million to B$35.6
deposts n Trndad and Tobago remaned unchanged at                  million during the first quarter of this year, as the expansion
1.46%, whle the basc prme-lendng rate went up from                 of 13.1% n revenues was surpassed by growth of 15.3% n
11.00% at the end of June 2006 to 11.75% at the end of                 expendture. Tax revenues were buoyed by growth n other
June 2007. The average dscount rate on 91-day treasury                stamp tax and real property tax recepts. Current and captal
blls ncreased to 6.90% at the end of June 2007 from                  expendture grew by 15.5% and 15.4%, respectvely. At
6.74% at the end of December 2006.                                     the end of Aprl 2007, the Central Government of Belze
                                                                       generated current and overall surpluses of Bz$27.6 mllon
Financial Sector                                                       and Bz$22.4 mllon, respectvely. Current revenue rose
        Between January-to-March 2007 n The Bahamas,                  by Bz$16.6 mllon, but current expendture decreased
the ease n domestc demand contrbuted to the sluggsh                by Bz$5.9 mllon, on account of lower nterest payments
growth n total credt, compared to growth of 2.6% n 2006,            regstered due to the restructured commercal debt.
Foreign Sector Developments                                                  Economic	Indicators:	Industrial	Economies
          In The Bahamas, the external current account
deficit widened by an estimated B$41.8 million to                    Countries              Real Output Unemployment                     Inflation
B$454.9 million during the first quarter of 2007, owing to           	                      (%	Growth)	   (%	Rate)	                      (%	Rate)
hgher net constructon and transportaton payments and              	                       2006	     2007	      2006	     2007P	     2006	        2007P
reduced toursm recepts. The surplus on the captal and             	                        Q2	       Q2	        Q2	       Q2	        Q2	          Q2
financial account rose by approximately B$46.5 million
to B$308.6 million, mainly on account of a significant               Canada                   2.8       2.5	P      6.8        6.1	P     2.2          2.5	P
                                                                     Euro Zone                2.2       2.5	P      5.8        6.9	P     2.4          1.9	P
ncrease n prvate sector nvestments. In Jamaca, the              France                   1.7       1.4	P      9.9        8.6	P     2.2          1.3	P
external current account deficit was estimated at US$391.3           Germany                  1.5       0.8	P      9.2        6.4	P     2.0          2.0	P
mllon for the January-to-Aprl perod of 2007, whch               Italy                    1.4       n.a.       n.a.       n.a.      2.3          1.9	P
                                                                     Japan                    1.0       1.1	P      4.3        3.7	P     0.2         -0.2	P
was US$108.0 million higher than the deficit for the                 Unted Kngdom           2.6       3.0	P      4.7        5.5	P     2.1          2.4	P
comparable perod n 2006. The expanson n the value                Unted States            2.5       3.8        4.7        4.5	P     3.4          3.6	P
of mports stemmed from hgher spendng on machnery
                                                                    Source: Various Central Banks and National Statistical Offices, IMF Estimates
and transport equpment and mscellaneous manufactured              P: Provsonal
goods, whle expendture on fuel mports declned by                Q2= Second Quarter
13.2% or US$83.0 mllon, relatve to the same perod of
2006. The growth n expendture on mports was partly
offset by ncreased earnngs from exports of mneral fuels,         Industrial Economies
chemcals and crude materals (ncludng alumna). In                        Economc actvty n the Unted States grew by
the capital and financial account, strong net private and           approximately 3.8% for the first six months of 2007,
official investment inflows were insufficient to finance the        despite slowing considerably in the first quarter. The
deficits on the current and capital accounts. Consequently,         expansion in real GDP primarily reflected positive
there was a contracton n the net nternatonal reserves           contrbutons from personal consumpton expendtures for
durng the January-to-Aprl perod. After regsterng net           servces and federal spendng. Between January and June,
nternatonal reserves of US$2.32 bllon at the end of             inflationary pressures were moderate, leading the Federal
December 2006, reserves contracted to US$2.24 bllon at            Open Market Commttee to keep the federal funds rate
the end of June 2007.                                               unchanged at 5.25%. The unemployment rate at the end
                                                                    of June was approxmately 4.5%, compared wth 4.7%
International	Economic	Developments                                 n the correspondng perod of 2006. The expanson of
                                                                    exports, coupled wth lower mports led to a reducton n
Overview                                                            the external current account balance.
         The global economy contnued to expand at a                         In the first half of 2007, the Canadian economy
fast pace during the first half of 2007. Although growth            grew by approxmately 2.5%, somewhat above ts potental
in the United States slowed in the first quarter, recent            of 2.2%. The demand for exports remaned the key drver
ndcators suggest that the economy reganed momentum               of economic growth, sustained by firm commodity prices.
n the second quarter. Economc actvty n the Euro area           The consumer price index and core inflation were higher
and Japan grew modestly, underpnned by the expansons              than the 2% inflation target. Therefore, the Bank of
n domestc demand, whle emergng market economes                 Canada rased ts key polcy nterest rate by one-quarter
contnued to expand, led by the rapd growth n Chna and           of one percentage point to 4.5% to reduce inflation closer
Brazl.                                                             to the target over the medum term. In addton, long-term

nterest rates rose and the Canadan dollar apprecated                 to the modest performance n the Japanese economy, as
sharply aganst the U.S. dollar at the end of June 2007.                the consumer prce ndex declned by approxmately 0.2%
          The Euro area economy ncreased moderately by                 at June 30, 2007. At the end of May 2007, the overall
2.5% durng the January-to-June perod of 2007, compared                unemployment rate was estmated at 3.7%, approxmately
to a rate of 3.6% n the smlar half-year n 2006. Ths                0.6 of a percentage pont lower than at the correspondng
performance may be attrbuted to the slower pace of                     tme n 2006
expanson n ndustral actvty, whch was partly offset by
the combnaton of a stronger euro and hgher nterest rates.           Emerging	Markets
Nonetheless, robust domestc demand and nvestments                              In Asa, economc actvty contnued to accelerate
contnued to support economc output durng the perod                  during the first two quarters of 2007. Ten years after the
under revew. At the end of June 2007, the unemployment                 start of the Asan crss, the regon concentrated on the
rate was 6.9%, some 1.1 percentage ponts hgher than the               rebuldng of nternatonal reserves, whch were exhausted
rate registered at the end of June 2006. The inflation rate             durng the year 1997. The regon’s three trllon-plus
was approxmately 1.9% at the end of June 2007, compared                dollars of foregn-exchange reserves has gven the Asan
to 2.4% at the end of June one year ago. At the end of June             region tremendous financial global power and also little or
2007, the mnmum bd rate set by the European Central                  no reasons for speculaton aganst the currences. Chna’s
Bank was 4.0%, followng two separate ncreases of 25                   economy grew by 11.1% in the first quarter and preliminary
bass ponts n March and June 2007.                                    data for June suggest that output growth was almost 12% n
          The Unted Kngdom economy expanded by 3.0%                   the second quarter. Foregn drect nvestments clmbed by
during the first six months of 2007, stemming from robust               an estimated 12.2% in the first half of 2007 when compared
domestic demand for goods and financial services. As at                 to 2006, as Chna regstered a trade surplus that was almost
the end of March 2007, the unemployment rate was 5.5%,                  twce the surplus reported at the end of June 2006. The
approxmately 0.8 percentage ponts hgher than the rate                Korean economy grew moderately due to strong exports
at the end of the first quarter of 2006. During the period              and ndustral actvty n 2007. Employment contnued to
under revew, producer prces remaned relatvely stable, as            increase at a steady pace and inflationary pressures were
inflationary pressures were modest. At the end of June, the             subdued during the first six months of 2007. The Bank of
annual inflation rate was estimated at 2.4%, slightly above             Korea kept ts overnght call rate at 4.5%, whch t has held
the rate of 2.1% recorded at the end of the second quarter.             snce August 2006.
The Bank of England kept ts polcy rate unchanged at                            Economc actvty n Latn Amerca remaned
5.5% at the end of the June 2007, followng an ncrease of              buoyant through robust domestc demand n the regon
25 bass ponts n January 2007. At the end of May 2007,                and low levels of poltcal dsturbances. Brazl’s economy
a modest rse of 1.9% n exports combned wth a slght                 and currency remaned bullsh durng the revew perod,
contracton n mports contrbuted to the lowest external               buoyed by favourable nterest rate dfferentals, healthy
trade and current account deficit in almost two years.                  foreign direct investment inflows and booming exports.
          The Japanese economy grew by an estmated 1.1%                The Chlean economy grew at a faster pace, although
durng the second quarter of 2007, after an ncrease of 3.3%            accompanied by higher inflation of 3.2% as at the end of
in the first quarter of this year. Japan’s industrial production        June 2007. By May 2007, the growth rate of ndustral
rebounded n June, endng the worst manufacturng slump                 producton n Mexco was an estmated 1.1%, compared
n almost two years. Some concerns n the Asan regon                  to growth of 5.7% n May 2006. In Argentna, economc
eased as growth n the world’s second-largest economy                   growth rates underperformed during the first six months
pcked up. The effects of fallng prces also contrbuted               of 2007 and inflationary pressures continued to be a

                                                    Commodity	Prices

  Commodities	                                Jun-06R		         Dec-06P		         Jun-07P	       %	Change	       %	Change		
	 	                                              	                 	                 	           on	June	06	   on	December	06

	 Total (Index of Market Prces)                 214.1            204.1              226.6           5.8             11.0
  Non-Fuel (Index of Market Prces)              175.0            188.2              210.1          20.0             11.6
  Food (Index of Market Prces)                  140.1            141.9              154.0           9.9              8.5
  Sugar (US ¢ / lb)                               30.6             32.6               33.0           7.9              0.1
  Bananas (US $ / metrc ton)                    713.8            656.4              779.0           9.1             30.0
  Rce (US $ / metrc ton)                       305.6            309.3              326.0           6.7              6.2
  Wheat (US $ / metrc ton)                      195.2            204.3              223.0          14.3              7.7
  Soybeans (US $ / metrc ton)                   217.0            243.0              303.0          39.6             28.9
  Metals (Index of Market Prces)                214.1            204.1              286.6          32.4             15.6
  Alumnum (US $ / metrc ton)                2,491.0          2,823.7            2,681.0           7.6             -1.7
  Iron Ore (US ¢ / metrc ton unt)               77.4             77.4               85.0           9.9              9.9
  Copper (US $ / metrc ton)                   7,222.8          6,681.0            7,514.0           4.0              6.3
  Slver (US ¢ / troy ounce)                   1,077.4          1,330.0            1,254.0          16.4             -6.4
  Gold (US $ / troy ounce)                       596.2            629.8              650.5           9.1              3.3
  Petroleum (US $ / barrel)                       68.3             61.0               68.2          -0.1             15.6

Source: IMF Commodty Prces
P: Provsonal
R: Revsed

controversal topc, especally wth an electon scheduled          11.6%, whle petroleum prces grew robustly by 15.6%.
for late 2007.                                                      The prce of food commodtes expanded by 8.5% as
                                                                    strong ncreases n the prce of bananas, wheat, rce and
Commodity Prices                                                    sugar were registered during the first six months of 2007.
        During the first half of 2007, the overall commodity        In lne wth the strong demand by ndustral countres for
prce ndex rose by 11.0%, led by broad-based growth n             copper, znc and nckel, the metal prce ndex ncreased by
non-fuel commodtes and metal prces. At the end of June           15.6%.
2007, the non-fuel prce ndex surged by approxmately

                  Regional	and	International	Capital	Markets                                                              Section	2

Regional	Stock	Exchanges                                             the Trndad Cement Lmted experenced the largest prce
                                                                     declne of 72% over the quarter, followed by Barbados
Barbados Stock Exchange                                              Farms Lmted, wth a decrease of 70.5%.
         The Barbados Stock Exchange (BSE) recorded                          The Cross-Lsted Index moved from 2,015.13 to
mxed performances for the companes lsted durng the               2,000.74, representng a quarterly reducton of 0.71%.
second quarter of 2007. The Composte Index moved                    The delstng of BWIA West Indes Arways Lmted
from 945.61 to 949.14, representng a margnal ncrease of           during the period resulted in a significant contraction in
0.37%, whle the market captalsaton for the Composte             the market captalsaton for cross-lsted companes, from
ndex decreased by $3.22 bllon, to $17.38 bllon at end-
June 2007.
         The Local ndex expanded from 3,597.40 to                                     Mutual	Fund	Performance
3,646.30 over the quarter, as 11 companes advanced, 8                                    By	Net	Asset	Value
declined and 7 remained firm. Unlike the performance
of the Composte Index, market captalsaton for local
                                                                      Mutual Funds                         June 30 ‘07   Mar. 31 ‘07
companes ncreased by 1.36% to $9.87 bllon at the end                                                     (Bds $)         (Bds $)
of the perod. The volume leader n the regular market was
Sagcor Fnancal Corporaton, tradng 1,055,806 shares.              Roybar Investment Corp                  3.870        3.790
Sagcor Fnancal Corporaton was also the most lqud                Fortress Carbbean Growth Fund          4.490        4.370
                                                                      Fortress Hgh Interest Fund - ACC       1.364        1.347
securty for the quarter, accountng for 402 (39%) of the             Fortress Hgh Interest Fund - DIST      1.013        1.024
1,021 trades performed on the BSE. Ths was followed                  BNB Income Fund                         1.220        1.210
by the Insurance Corporaton of Barbados Lmted, the                 BNB Captal Growth Fund                 1.170        1.180
                                                                      BNB Property Fund                       1.710        1.700
only other company to account for more than 10% of BSE                CLICO Balanced Fund Inc.                1.160        1.150
trades for the perod.                                                Sagcor Global Balanced Fund            2.100        2.080
         Durng the quarter endng June 2007, Sunbeach                Sagcor Select Growth Fund              1.110        1.080
                                                                      Sagcor Preferred Income Fund           1.030        1.050
Communcatons Inc. recorded the largest share prce
increase in the junior market. In the regular market,                Source: Barbados Stock Exchange
Barbados Shppng & Tradng Co. Lmted regstered the
largest prce apprecaton of 10.2%. for the perod. Whlst,
                                                                     $10.86 billion to $7.48 billion (31.1%). After adjusting
                                                                     for the delstng, the market captalsaton for cross-lsted
                                                                     companes decreased by approxmately 1.0%.
        Barbados	Stock	Exchange	Volume	Leaders
                          (Aprl – June 2007)                                 For the second quarter of 2007, local mutual
                                                                     funds reported growth n eght nstances, whle three
                                                                     funds declned. Ths represents an mproved performance
  Institution	        	                         Volume	Traded
                                                                     compared to the first quarter of the year, when only six
                                                                     mutual funds regstered ncreases n ther net asset values
  Sagcor Fnancal Corporaton                     1.056            (NAV) and four contracted.
  Insurance Corporaton of Barbados Ltd.            1.048                     Sagcor Select Growth Fund recorded the hghest
  Frst Carbbean Internatonal Bank                0.586            quarterly expanson of 2.78%, up from the 1.89% rse
  Fortress Carbbean Property Fund                  0.216
                                                                     recorded n the prevous quarter. The fund was closely
  Barbados Shppng & Tradng Lmted               0.215
                                                                     followed by Fortress Carbbean Growth Fund, whch
Source: Barbados Stock Exchange                                      grew by 2.75%, in contrast to the first quarter decline of
0.23%. After registering a significant increase earlier in                               Over the revew perod, 14 companes advanced,
the year, Sagcor Preferred Income Fund experenced the                        23 declined and 5 remained unchanged. The major
largest decrease for the second quarter of 1.9%. Declnes                      companes advancng were: Supreme Ventures, whch
n the NAV of the varous mutual funds were attrbuted to                      regstered the best performance of a 61.90% ncrease n
the reducton n share prces of local equtes and dvdend                   share prce; FrstCarbbean Internatonal Bank Jamaca
payments.                                                                      (36.52%); and Trndad Cement Lmted (11.84%). Salada
                                                                               Foods moved from beng the best advancng company n
Jamaica Stock Exchange (JSE)                                                   the first quarter to record the worst decline in the second
         Durng the second quarter of 2007, there was                          quarter - down by 41.82%.
a significant decrease in trading volume on the JSE, as
market volume amounted to 338.0 mllon unts valued                           Trinidad and Tobago Stock Exchange (TTSE)
at over JAM$2,692.6 mllon. The JSE Index declned                                     Durng the second quarter of 2007, the TTSE Index
overall for the second quarter, movng from 90,595.04                          contnued on ts downward trend, to report a contracton of
at the begnnng of the perod, to 90,069.93 by end-June                       1.12%, and closed at 918.79 points. Similar to the first
2007, representng a contracton of 0.58%.                                     quarter of 2007, the number of companes that declned
         Supreme Ventures Lmted and Cable & Wreless                         (totallng 19), outnumbered those advancng (12), and
Jamaca Ltd. exchanged postons durng the second quarter                     those that held firm (2).
wth 136,623,681 (40.42% of the market) and 54,912,204                                  The volume leaders were Natonal Commercal
unts traded respectvely, to be the top two volume leaders                    Bank Jamaca wth 2,229, 467 shares traded (accountng
for the thrd consecutve quarter. Jamaca Brolers Lmted                    for 14.69% of the market), Trndad Cement Lmted wth
followed these performances wth 26,163,601 unts beng                        1,636,208 shares traded and Sagcor Fnancal Corporaton
traded for the quarter.                                                        wth 1,603,338 shares traded.

                                                        Top-Ten	Regional	Performers
                                                       By	Share	Price	Appreciation	(%)*
                                                             Second Quarter 2007

            Barbados                   %                 Jamaca                         %                Trndad                               %

  Supreme Ventures
  B’dos Shppng & Tradng            10.20   Supreme Ventures 61.90                     61.90 Indes) Trndad Lmted
                                                                                Readymx (West Readymx (West Indes) Trndad Lmted 45.21     45.21
  Cable &Wreless Internatonal Bank
  FrstCarbbean (Barbados) Lmted 4.24                                        Jamaca 36.52 Prestge Holdngs Lmted
                                              FrstCarbbean Internatonal Bank Prestge Holdngs Lmted
                                                               36.52                                                                     12.48   12.48
  Trndad Cement Lmted              3.49                    Lmted
                                              Trndad Cement 11.84                      11.84 Bank Merchant
                                                                                ANSA Merchant ANSALmted Bank Lmted                   10.00   10.00
  Grace, Kennedy & Co. Ltd             2.78   Hardware & Lumber                           8.93 Angostura Holdngs Lmted                         8.67
  West Inda & Lumber
  Hardware Bscut Co.                 2.50                     8.93                       Holdngs West Indan Tobacco Company Lmted 8.67
                                              FrstCarbbean Internatonal Bank Angostura 6.95 TheLmted                                         7.32
  FrstCarbbean Internatonal Jamaca 1.71
  FrstCarbbean Int’ll BankBank                                6.95
                                              Jamaca Brolers Group            The West Indan Tobacco Company Lmted
                                                                                          5.68 Valpark Shoppng Plaza Lmted             7.32    5.26
  Jamaca Brolers Group
  Barbados Farms                       1.52                     5.68                      5.50 FrstCarbbean Internatonal Bank Lmted 5.26
                                              Pan Carbbean Fnancal Servce Valpark Shoppng Plaza Lmted                                      4.55
  Insurance Corporaton of Barbados
  Pan Carbbean Fnancal Servce 1.41        Gleaner Company 5.50                        5.11 Sagcor Fnancal Lmted
                                                                                FrstCarbbean Internatonal BankCorporaton              4.55    2.27
  Banks Holdngs                       1.27   Montego Freeport                            3.00 Barbados Shppng & Tradng Company Lmted        2.22
  Gleaner Company                                               5.11            Sagcor Fnancal Corporaton                             2.27
  Lght & Power Holdngs               0.48   Carbbean Cement                            2.59 L.J. Wllams Lmted                              1.69
  Montego Freeport                                             3.00            Barbados Shppng & Tradng Co. Ltd.                      2.22
  Carbbean Cement                                             2.59            L.J. Wllams Lmted                                     1.69
Source: Bloomberg Servce

         Readymx (West Indes) Trndad Lmted
advanced by 45.21% durng the second quarter, to take                         Emerging	Market	Bond	Indices
first place in the list of companies advancing for the                           June	2004	–	June	2007
perod. Prestge Holdngs Lmted followed wth 12.48%                                    (Quarterly)
and ANSA Merchant Bank Lmted wth 10.00%. The
shares of Captal Merchant Bank Lmted declned the
most, fallng by 23.08% for the second quarter of 2007.

Emerging	Markets

Bond Markets
         Durng the January-to-June 2007 perod, the
returns on emergng market bond ndces were mxed,
partly the result of the revaluaton of asset prces n the
first quarter, emanating from geo-political tensions in
some energy supplyng natons. The performance of bond
markets n Latn Amerca mproved margnally durng
the second quarter of 2007, following robust first quarter
growth. In Asa, Chnese and other Asan bond markets
contnued to underperform durng the second quarter of
2007, following the slump in asset prices in the first part
of the year.
         In Mexco, Brazl and Argentna, bond yelds
remaned bullsh despte the pass-through effect from              resulted n an overall declne n the performance of Asan
the slump in the US economy in the first quarter of 2007.          bond markets for the January-to-June 2007 perod.
Yelds on Mexco’s 10-year government bonds apprecated
moderately, wth these peso-denomnated bonds                      Equity Markets
regsterng szeable securty ssuances durng the quarter.                 Latn Amercan equty markets rose by 25.3% for
Brazlan bond yelds rose after stronger than expected            the first two quarters of the year, followed by emerging
ndustral producton for May 2007 upheld speculaton              Asan equtes, whch expanded by 17.3%. All of the
that the Central Bank would halt nterest rate cuts, whch         Latn Amercan stock ndces under revew ncreased for
started snce September 2005. The yelds on Argentne              the perod, wth the excepton of Venezuela’s Caracas
bonds ncreased margnally durng the quarter, as debt             ndex, whch declned by 24%. The Brazlan Bovespa and
service difficulties affected the country’s credit ratings.        the Chlean ndex recorded the strongest performances,
Local and foregn nvestors n Venezuelan government               expandng by 22.3% and 28.8%, respectvely. All Asan
securtes opted not to nvest heavly n these assets, as         equty ndces under revew grew robustly for the perod.
inflationary pressures expanded and disruptive economic                     In Chle, stocks for Alfa and Cemex, led the IPSA
developments lngered durng the revew perod.                    equty ndex, whch ncreased by 28.8% durng the perod
         Bond markets n Asa underperformed durng the            January-to-June 2007. Prvate and publc sector companes
second quarter of the year, because the apprecaton n            n Brazl also regstered strong performances; Vale, the
the Japanese yen and other regonal currences dampened            Brazlan conglomerate, Electrobas and Petrobras, were
nvestors’ nterests for currency-backed securtes. Ths          some of the best performers for the first half of the year
              Emerging	Market	Equity	Indices                                                Emerging	Market	Currencies
                               (Quarterly)                                                             (Quarterly)
 Country/Regon             Index     Dec-06      Jun-07      % Ch          Country/Regon        Currency      Dec-06     Jun-07    % Ch

 Argentna              Merval        1,542.38     1644.85      6.6         Argentna               Peso           3.06       3.09     1.0
 Brazl                 Ovespa       44,473.71    54392.06     22.3         Brazl                  Real           2.13       1.93    -9.4
 Chle                   PSA          2,693.36     3470.18     28.8         Chle                   Peso         533.38    527.55     -1.1
 Mexco                   PC         26,448.32    31151.05     17.8         Mexco                  Peso          10.82     10.81     -0.1
 Venezuela              Caracas      52,233.68    39698.12    -24.0         Venezuela              Bolvar     2,147.30   2147.30      0.0
                                                                            Chna                   Yuan           7.80       7.61    -2.4
 Latin	America	            	          2,995.67	    3754.18	    25.3
                                                                            Hong Kong              Dollar          7.77       7.82     0.6
 Chna                 Shangha       2,675.47    3820.703     42.8
                                                                            Inda                  Rupee          44.26     40.70     -8.0
 Hong Kong            Hang Seng      19,964.72    21772.73      9.1
                                                                            Indonesa              Rupah      8994.00       9025      0.3
 Inda                 Mumba        13,786.91    14650.51      6.3
                                                                            Malaysa               Rngtt         3.53       3.45    -2.3
 Indonesa              Jakarta       1,805.52     2139.28     30.4
                                                                            Phlppnes             Peso          49.01     46.19     -5.7
 Malaysa            Kuala Lumpur     1,096.24     1354.38     23.5
                                                                            Sngapore              Dollar          1.53       1.53     0.0
 Phlppnes             PSE          2,982.54     3660.86     22.7
                                                                            South Korea             Won          930.00    923.60     -0.7
 Asa                                   371.46      435.61     17.3
                                                                            Thaland                Baht          35.45     31.70    -10.6
Source: Bloomberg Servce                                                   Tawan                 Dollar         32.59     32.85      0.8

                                                                           Source: Bloomberg Servce

on the Brazlan Bovespa ndex. In Mexco, Vtro led the
IPC index to healthy first-half gains. Venezuelan equities                 Currency Market
were unstable over the quarter, as inflation seemed                                 Most Latn Amercan currences deprecated
unmanageable and the natonalsng of utlty companes                    durng 2007. The Brazlan Real declned by 9.4% as the
contnued to plague the prvate sector. Consequently, the                  Central Bank bought dollars n the spot market to slow
Caracas index plunged by 24% during the first six-months                   the ralles n the Real - n an effort to make the export
of the year.                                                               market more compettve, snce a stronger currency
        Chnese equtes were among the best performers                    makes the prces of domestc products more expensve on
n the emergng markets. Shares of Png An, Chna’s                        the nternatonal market. The Peso n Chle and Mexco
second-biggest insurer, climbed as first-half profits                      dipped by 1.1% and 0.1%, respectively, despite inflation
doubled last year’s 3.95 bllon Yuan (US$522 mllon),                    projections remaining moderate during the first six months
on account of ncreased returns from nvestments and the                   of the year.
expanson n ts nsurance busness. Between January-                               The Asian currency rallies during the first half of
to-June 2007, Chinese banks were the major share price                     2007 were mostly offset by nterventons by the monetary
movers, whch contrbuted to the 42.8% growth on the                       authortes n the regon. The South Korea Won ganed 0.7%
Shangha ndex, whle n Malaysa and Sngapore export                     during the first six months of 2007, rebounding slightly
companes drove the performance on the respectve                          from the rapd dsposal of emergng market equtes early
ndces, by regsterng strong gans. The equty markets                   n 2007. In contrast, Tawan’s dollar deprecated by 0.8%,
n Hong Kong and Inda, rebounded from the asset-prce                     n spte of the Central Bank rasng nterest rates twce
adjustments that occurred in early 2007, to record growth                  during the first half of the year, to counter the rate at which
of 9.1% and 6.3%, respectvely.                                            funds were placed offshore to gan hgher returns. The

Sngapore dollar was one of the few Asan currences that                Canada
remaned unchanged at $1.53/US dollar for the January-                           Durng the second quarter, the Bank of Canada
June 2007 perod, as the Sngapore monetary authorty                    (BoC) mantaned ts target for the overnght rate at
continued to closely monitor its floating exchange rate.                 4.25%. Despte the contnued weakness n the US market,
However, low nterest rates n Sngapore resulted n the                 forecasts pont to the contnued robustness n the global
declne of ts dollar for the second quarter of 2007, despte            economy, whch should contnue to fuel the Canadan
strong economc condtons.                                              economy. However, the slowng U.S. economy has had
        Most other Asan currences strengthened over                    a moderatng effect on growth n Canada, leadng to
the perod vis-à-vis the US dollar. The Phlppnes Peso                 projections that domestic demand will become the main
gained on high economic growth projections and strong                    drver of growth n Canada, and that net exports to the US
remttances. Despte pressure stemmng from a szeable                   should exert a slghtly greater drag on growth n 2007.
current account surplus, Thaland’s Baht mproved based
on ncreased demand for local currency by naton exporters               United States
on the onshore baht market.                                                       Despte havng grown better-than-expected n
                                                                         the first quarter of 2007, the US economy expanded at
International	Interest	Rates                                             its weakest pace in over four years, while inflation also
                                                                         grew. Nevertheless, durng the quarter endng June, the
United Kingdom                                                           Federal Reserve (Fed) kept ts benchmark Federal Funds
          The Bank of England (BoE), wth year-on-year                   rate unchanged at 5.25%, whle mantanng a key concern
prces surgng, and seemngly lttle effect from the three               over rate of the inflation. Despite recent volatility in the
ncreases n borrowng costs snce late-2006, rased                     credit markets, it is expected that both growth and inflation
nterest rates by 25 basc ponts to a sx-year hgh of 5.5%             pressures will remain the key variable influencing the Fed’s
n May 2007. It s expected that ths most recent rate hke              decsons durng the second half of the year, although t
should be sufficient to maintain balance within the British              s not expected that the Fed wll change nterest rates n
economy, as there are sgns of weakenng n key economc                 early 2008.
varables.                                                                        Although captal remans readly avalable and
          With the risks to inflation on the upside in the short-        relatvely nexpensve for a broad range of nvestment
term, there was much speculaton that the BoE mght push                 opportuntes, the volatlty n the debt markets stemmng
nterest rates by a half-pont – an unprecedented move n                from the collapse of the sub-prme mortgage market, s
ts 10-year hstory. However, another new factor that has                begnnng to affect borrowng costs and terms. There s
seemngly predcted a hold on further rate hkes durng                  sufficient worry over the possibility of a credit crunch,
the remander of the year has been the weakenng of the                  and a housng-led downturn n the economy, that a rate
US economy, and the Monetary Polcy Commttee wll be                    cut in Q1 2008 is already being reflected in the Fed Funds
alert to the rsk that a slowdown n the US wll have spll-             futures contracts. Gven the relatvely strong readng of
over effects on the UK economy.                                          recent economc data, the market contnues to predct that
          The BoE also believes that inflation will revert               nterest rates are lkely to stay at 5.25% tll the end of
from the current 3.1% recorded at the end of the second                  2007.
quarter, as 2007 progresses and wll be back to ts 2%
target by the end of the year. It s also antcpated that               Eurozone
the housng market wll contnue to slow further snce                          On the back of a strengthenng Eurozone
rates have rsen one percentage pont wthn the past nne-              economy, the European Central Bank (ECB) rased ts
months.                                                                  key benchmark rate by 0.25%, to 4% durng the second
quarter of 2007. This marks the eighth, twenty-five basis                 Further ncreases are expected later n the year,
pont rse snce December 2005, when the ECB started              to counter inflationary pressures as economic growth
t tghtenng phase. Euro zone nterest rates last peaked         passes a ten-year hgh. Durng the Aprl – June perod,
at 4.75% n October 2000, and 4% s wdely vewed by              Eurozone inflation remained below the ECB target of 2%.
market partcpants as the neutral rate, and thus unlkely        Nevertheless, the money markets contnue to dscount a
to mpact on the strengthenng economy.                           further rse n nterest rates ths year, wth the 3-month
                                                                  Euro rate tradng at 4.50%.

                   Trade	Update                                                                                                 Section	3

CARICOM-Canada	 (CARIBCAN)	 Trade	 Relations:	                                wth a World Trade Organsaton (WTO) waver, whch
The Likely Benefits of a Mature Bilateral Agreement                           expred on the 31st of December 2006. Presently, there
with	Canada                                                                   are ongong dscussons wth the vew of revtalsng ths
Overview                                                                               As a result of recent developments wth regards
         In spte of the apprehenson among some countres                    to Canada’s ncreasng market lberalsaton through
wthn the Carbbean Communty (CARICOM) about                                varous trade agreements negotated wth other tradng
ther vulnerablty, there s an ongong effort to lberalse                 partners, CARIBCAN’s relatve value has decreased when
markets, wth a partcular emphass on trade lberalsaton                   compared to competng agreements. Consequently, at the
because of its perceived benefits. As a consequence, there                    25th CARICOM Heads of Government Meetng held n
s a plethora of trade agreements governng CARICOM                           July 2004, a mandate was ssued to negotate an mproved
relationships with several of its major trading partners. This                trade agreement wth Canada, buldng on the exstng
paper explores one such relatonshp, namely CARICOM-                         CARIBCAN commtments. The focus wll be prmarly on
Canada. Over the years, most CARICOM states and                               four areas: () market access; () nvestment; () servces
Canada have been nvolved n varyng trade and economc                       and (v) nsttutonal arrangements and dspute settlements.
relatons, whch are covered under a number of nstruments:                   The mmedate ntentons wll be to mprove market access
CARIBCAN, a non-recprocal preferental agreement                             for CARICOM exports of goods and servces, broaden
granted by Canada for goods; the 1979 CARICOM-                                the country coverage to nclude all CARICOM states and
Canada Trade and Economc Co-operaton Agreement                              stimulate increased flows of Canadian investment into the
and ts Protocols, ncludng the 1998 Protocol on Rum                         regon where possble.
and Blateral Investment Treates wth both Barbados and                               Havng been n exstence for 20 years, CARIBCAN
Trndad and Tobago.                                                          s slated to be replaced by an enhanced and more mature
         Established in 1986, CARIBCAN’s main objectives                      Carbbean-Canada Free Trade Agreement, wth equal
were to ncrease Commonwealth Carbbean trade and                             recprocal access for Canadan companes to the Carbbean
export earnngs, promote new nvestment opportuntes,                        market as well, wth a WTO waver granted up to 2011.2
mprove economc development and stmulate a more                                      In lght of these recent developments, an
advanced economc ntegraton and co-operaton between                        examination of the likely benefits of a more mature free
the Carbbean and Canada. The most mportant feature                          trade agreement wth Canada s mportant. The remander
of CARIBCAN was the unlateral extenson by Canada,                           of ths artcle wll explore the recent developments n
whch provded for duty free access to the Canadan market                    CARICOM-Canada relatons, focusng on the mpact of
for most commodtes orgnatng from Commonwealth                            past trade developments and the benefits of an improved
Carbbean countres. Thus, under the CARIBCAN trade                           free trade arrangement.
agreement, eghteen terrtores were elgble to receve
duty-free access.1 Ths agreement, however, was ssued                        CARIBCAN Trade Arrangement and Recent Trade
                                                                                       Canada has remaned a key market for trade,
     These are Angulla, Antgua and Barbuda, The Bahamas, Barba-             recordng annual consumpton of almost US$377 bllon of
dos, Belze, Bermuda, the Brtsh Vrgn Islands, the Cayman Islands,         commercal goods and servces and reportng annual growth
Domnca, Grenada, Guyana, Jamaca, Montserrat, St. Ktts and Nevs,          of 10% between 2001 and 2005. However, whle Canada
St. Luca, St. Vncent and the Grenadnes, Trndad and Tobago and the
Turks and Cacos Islands.
                                                                              only accounts for a small proporton of CARICOM trade
2 CRNM Prvate Sector Trade Bref, Volume 21 May-
                                                                              relatve to the other tradng partners, t s, nevertheless,
June 2007.                                                                    mportant to the regon.
         The rules of orgn crtera ndcate that goods wll        trade was US$1.3 bllon, whle Canadan nvestment nto
only be elgble for duty-free entry nto Canada f at least          the regon amounted to US$25 bllon, makng Canada
60 percent of the ex-factory prce s derved from any of             CARICOM’s thrd most mportant source of nvestment
the eighteen regional beneficiary territories. This price             after the Unted States and the Unted Kngdom. The
also includes production costs, overheads, profits and                largest growth n exports stemmed from the servces and
export packagng. Addtonally, the exported goods must               nvestment sectors. Growth n drect nvestment from
come drectly from the Carbbean to Canada wthout any                Canada to CARICOM arses from the fact that a substantal
further work beng carred out at foregn transhpment                number of the corporatons operatng wthn the Carbbean
ponts. Moreover, CARIBCAN does not exempt exporters                  regon are resdent n Canada.
from the varyng taxes and regulatons that govern the sale                    As more emphass s placed on these areas – mostly
or mportaton of goods n the Canadan market, such as               n servces and nvestment – along wth further reductons
sales and excse taxes, and excse dutes where applcable,           of trade restrctons and re-negotaton of the rules of
packagng and labellng regulatons, product standards                orgn governng CARIBCAN, t s lkely that greater
and safety regulatons, as well as health and standard                benefits from an improved free trade agreement would be
regulatons. Furthermore, tems lke textles/apparel,                accomplshed. Ths has long been the vew and nterest
footwear, luggage/handbags, leather garments, lubrcatng             of CARICOM countres and ther representatves. At the
ols and methanol are exempted from all duty-free status              CARICOM Exploratory Group on CARICOM-Canada
under the CARIBCAN arrangement.                                       Trade Negotatons Meetng n 2004, the Chef Trade
         Tradtonally, exports from CARICOM to Canada                Officer in the Ministry of Foreign Affairs and International
ncluded alumnum oxde, non-monetary gold, methanol,                Trade n Grenada, Mr. Olver Joseph, shared ths keen
sugar, bars and rods of non-alloy steel, urea, rum and tafia,         nterest when he sad, “t s n servces where Grenada
artcles of apparel and clothng accessores, petroleum ols          has the greatest potential, and stands to benefit most”.3
and ols obtaned from btumnous mnerals. In 2005, the              Therefore, not only do the Most Developed Countres
Regonal Negotatng Machnery (RNM) dscovered that                  (MDCs) of CARICOM stand to benefit from CARIBCAN,
there were notceable reductons n the exports of methanol,          but also the OECS and the Lesser Developed Countres
raw sugar and apparel and clothng accessores. In contrast,          (LDCs) lke Belze.
there was growth n exports of vegetables, roots, tubers,
and other edible vegetable products, fish, sauces, mixed              Conclusion
condments and seasonngs.                                                     Negotatons have not commenced largely because
         Despte the declne of some exported products                Canadian officials have not yet received any further
from CARICOM to Canada, merchandse trade s stll                    negotatng mandate from ther government. Although
on the rse. In 2002, the total two-way merchandse trade             both partes have expressed a keen nterest n negotatng
between CARICOM and Canada reached C$1.2 bllon, of                  a more advanced Free Trade Agreement, Canada s
whch C$335 mllon accounted for exports to Canada from              stll evaluatng the best way to mprove ts hemspherc
CARICOM. Moreover, n 2005, two-way merchandse                       blateral and nvestment relatons, whle the Carbbean s
                                                                      also currently negotatng wth the European Unon (EU)
                                                                      for an Economc Partnershp Agreement (EPA). In lght
                                                                      of the mportance of ths agreement to the regon, greater
3 RNM News Release CRMN-PR 14/04, May 28th            emphass needs to be placed on acceleratng CARICOM-
2004.                                                                 Canada negotatons.

                                         Building	the	Economic	Resilience	of	Small	States,	
                                  Edted by Lno Brguglo, Gordon Cordna and Elawony J. Ksanga
                                                    A Revew by Andre Burgess*

Introduction                                                                       The volume also nferred that all small states are
                                                                          not necessarly nherently vulnerable, snce some have
         Issues surroundng the economc reslence of                    relatvely hgh levels of GDP per capta, or have proven
small states, n vew of ther hgh vulnerablty to external             themselves to be reslent to the vulnerablty they face.
shocks, have prompted many publcatons and nternatonal                 Another mportant facet of the book, whch s partcularly
dscussons. One such forum was the Maurtus Internatonal               evident in chapter fourteen, is that it was one of the first
Meetng on the 10-year revew of the Barbados Programme                   to suggest the buldng of an economc reslence ndex
of Acton, held n January 2005. Ths meetng recommended                 based on measures of good governance, socal reslence,
addtonal research and also called for the nternatonal                 economc reslence and the envronmental aspects of
communty to gve due consderaton to the development                    reslence.
of a reslence ndex. In lght of ths, the Commonwealth                          The book s dvded nto three parts: “Economc
Secretarat and the Small States Insttute of the Unversty              Reslence and Economc Polcy”, “Socal, Poltcal and
of Malta collaborated to conceptualse a book enttled                    Envronmental Aspects of Reslence Buldng”, and
“Buldng the Economc Reslence of Small States”.                       “Towards the Development of an Economc Reslence
Lno Brguglo, Gordon Cordna and Elawony J. Ksanga                    Index”. These sectons are now dscussed n turn.
edted the text, wth contrbutons from professonal
economsts and researchers from all over the globe. The                   Economic	Resilience	and	Economic	Policy
book gves an n-depth account of the economc reslence                          Ths secton began wth a paper enttled
capactes of small open economes and ther response to                  “Macroeconomc Reform and Reslence Buldng n
shocks and macroeconomc nstablty. Most college and                    Small States” wrtten by T. K. Jayaraman. Hs man
undergraduate students can understand the lterature and                  thess s that “Sound macroeconomc polces are key
emprcal analyss used n ths book. In addton, t can                 requrements for buldng economc reslence n small
offer graduates, professonals and polcymakers greater                   states to enable them to wthstand the mpact of exogenous
nsght nto ssues surroundng economc reslence and                   shocks, ncludng weather related dsturbances.” It was
vulnerablty.                                                            also mentoned that the Sngapore model, wth ts hgh
         Bearng n mnd that the nexus between                           degree of reslence to shocks, was not easly replcable by
vulnerablty and reslence n small economes may vary,                 most small states because of their unique country specific
the book approprately categorses the dfferent slands                  needs and geographcal characterstcs. However, despte
accordng to attrbutes such as the uses and the effects                  some handcaps, many small states have managed to
of macroeconomic policies. For instance, as financial                     forge ahead economcally, relyng on preferental tradng
lberalsaton and globalsaton ncrease, small states gan              arrangements wth the European Unon (EU) and the
new opportuntes but at the same tme, struggle wth                     Unted States (US). Now, wth the advent of Globalsaton,
macroeconomc stablty and the need for market reform.                   small states face new challenges such as the restructurng
Hence, the book addresses what the authors consder to                    of ther economes to compete wth larger countres n the
be the most pressng ssues that make small states more                   export of prmary products such as bananas and sugar.
vulnerable to exogenous shocks than other economes.                      Then there are structural adjustment issues relating to their
                                                                          relatively high fiscal and external current account deficits
                                                                          and thin financial sectors. In addition they face challenges
                                                                          surroundng the movement towards regonal ntegraton,
* Mr. Andre Burgess is a Research Officer, in the Research Depart-
                                                                          as well as plans for the preparaton and management of
ment of the Central Bank Of Barbados                                      disasters. As a result, it is increasingly difficult for these
                                                                          states to encourage Foregn Drect Investment (FDI). Ths
chapter puts forward a number of polcy prescrptons               as ths sector develops and also through nsttutonal
to alleviate some of these problems, such as fiscal                 development. The Maurtus Experence s a case n
consolidation and financial liberalisation.                         pont.
         Chapter Three, authored by Satsh Chand, explans                   In Chapter Sx, Andrew Downes assocates
how and why mcrostates should mnmse the volatlty n           market reform wth reslence, hghlghtng how t
unemployment. He laments the noton that macroeconomc              facilitates adjustment to external shocks. He argues “ that
stablsaton could be acheved by freer moblty of labour         the market mechansm can fal n certan crcumstances
between small states and the rest of the world. The paper           due to the presence of externaltes n both producton
also ponts to the use of economc polces “n facltatng         and consumpton, asymmetrc nformaton on the part of
labour by mprovng sklls and provdng nformaton”.              market partcpants, lmted competton owng to scale
He later concludes that mcrostates are more vulnerable             and scope economes over relevant range of producton,
to external shocks than ther larger counterparts because           ndvsbltes and the exstence of rsk and uncertanty.”
of the lmted capacty to use demand management for                In essence, Downes states that the nature of market
stablsaton purposes followng adverse macroeconomc              reform depends on policy measures that reflect the present
shocks.                                                             nsttutonal factors, market falures, government falure
         Delsle Worrell, Harold Codrngton, Roland                 and the use of structural adjustment policies. He also
Cragwell and Kevn Greendge, n Chapter four, dscuss             examned the market reforms n several SIDS to determne
the nsttutonal arrangements for exchange rate targetng          their level of economic efficiency, promotion of economic
n Barbados, and the crtcal role they played n the polcy        growth and socal costs of government nterventon. Ths
response to the balance of payments crss of 1991- 92. The         was acheved by evaluatng the nsttutonal frameworks
artcle also hghlghts the collaboratve effort between the        of the SIDS. He concludes that the global and regonal
Central Bank and the Mnstry of Fnance n mplementng            envronment often force SIDS to reform ther economes
a mixture of supportive monetary and fiscal policies to             to become more compettve and acheve hgher growth
mantan the exchange rate peg to the US dollar. The paper          rates. However, the lack of human and financial resources
used graphical analysis of indicators of growth, inflation,         makes these reforms difficult to implement.
the external current account balance and the nternatonal                   The final chapter in this section was by Harvey
reserve levels over a perod of tme to explan the causes          W. Armstrong and Robert Read. The authors employed
and the resolution of the crisis. The Barbados adjustment           two methods to dscuss the determnants of economc
programme relied heavily on fiscal arrangements to                  performances of small terrtores. Frstly, they examned
mantan adequate reserve levels, reduce mports and “to            the openness and vulnerabltes to external shocks, and
contain inflation through a temporary contraction of real           then consdered addtonal factors such as geographcal
output and expendture”.                                            variables and non-economic influences, downplayed
         The paper by Chandan Kheswar Jankee, presented             n tradtonal trade theores such as the Lews model.
n Chapter Fve, argues that there are advantages and               Armstrong and Read found that the sze of these small
dsadvantages of mantanng an exchange rate peg and               states amplified the economic challenges that influence
that polcymakers have to wegh these pros and cons                 the growth rate. Hence, greater attenton must be pad to
to determne whch exchange rate mechansm s n the                sectoral structures, trade, remoteness, locaton of small
best interest of their country. For example, financial              states, and the desgn of economc polces n relaton to
lberalsaton has resulted n Small Island Developng              good governance. More so, factors of clmate, mountanous
States (SIDS) beng more susceptble to exogenous                   areas and remoteness, all influence the cost of imports and
shocks; but has also led to the modernsaton of the                trade, whch then make these terrtores more vulnerable
financial sector. Hence, further growth can be gained               and less reslent to external shocks.
Social,	 Political	 and	 Environmental	 Aspects	 of	                 reslence and socal coheson at the natonal and regonal
Resilience	Building	                                                 levels. A comparson wth the framework from Canada
         Mahendra Reddy s the author of Chapter eght.              and the European system was also provded.
Lke the precedng wrters, he vewed SIDS as havng                          Godfrey Baldacchno, n Chapter Eleven,
nherent constrants to economc growth because of ther             vewed small states as beng exposed to “vagares of the
sze and nsularty. He also noted that SIDS face self               transnatonal”. The external effects of the nternatonal
inflicted constraints because of poor governance, inefficient        environment can influence the national statistics in the
resource allocation and capital flight. These attributes             small state, but endogenous polcy plans can be used to
are fundamental to economc growth and development.                  counteract the nherent openness of the economy. The local
In addton, the chapter analysed the prevalence of                  economy, the naton, the household and the ndvdual all
corrupton and good governance n SIDS. He concluded                 make up a larger system, and through awareness, empower
that good governance postvely affects allocaton and               the dfferent enttes wthn the system to dentfy the
use of resources, and serves to boost investor confidence.           poston of reslence and survval of small states. These
Therefore, ssues of governance must be observed closely.            enttes also explan the aspects of vulnerabltes of these
         The next artcle wrtten by Davd Carment,                  states.
Stewart Prest and Yagadeesen Samy, also looked at                            In Chapter Twelve, John L. Roberts focuses on the
governance, but as t relates to ssues of government                economc and socal realtes of the AIMS group of SIDS
falure. The authors felt that state fraglty and economc          as well as on the buldng of reslence n these groups of
development are nextrcably lnked. SIDS have                       countres. The acronym AIMS stands for Atlantc Ocean,
vulnerabltes assocated wth governance, whch are                Indan Ocean, Medterranean Sea and South Chna Sea.
estmated by a set of rsk ndcators that show that SIDS,           Some of the recommendatons for buldng economc
relatve to other economes, fall n the medum range of             reslence n the AIMS group rely heavly on envronmental
rsk. The paper also dscusses the causes of state falure           factors, which also influence social and economic realities.
by examnng the current themes on early warnng and                 Envronmental sustanablty and the management of
rsk assessment. In concluson, the authors pont to the             natural captal and government are mportant. Hence
need to examne further nterrelatonshps between the               Roberts concludes that: “Envronmental management
lterature on economc vulnerablty (e.g. that Brguglo            cannot be sustaned unless t s an ntegral part of the
et al. (2005) used to operatonalse ther ndex), and the           resource development, lnkng the value and potental
literature on state fragility and conflict (e.g. that informs        of natural resources to the process of buldng economc
the Country Indcators for the Foregn Polcy (CIFP) rsk            reslence.”
ndex).                                                                       The Exclusve Economc Zones (EEZs) and how
         Cletus Sprnger’s paper enttled “Economc                  they may be used by small states to dversfy ther economes
Reslence and Socal Coheson: The Case of Small Island             were examned n the next chapter wrtten by Tshaka H.
States n the Eastern Carbbean”, looks at evolvng theores         Fraser and Espen Ronneberg. SIDS depend heavly on
on reslence and vulnerablty. Socal vulnerablty,               imported goods and inefficient export industries. Although
socal development and socal coheson were developed                SIDS have vast EEZs n proporton to ther land area and
separately n the chapter through the conceptual framework           population size, they do not generally enjoy a fair share of
explanng the deas of vulnerablty. In addton, the              the proceeds. Several lmtatons of EEZ management exst
artcle evaluates the threats to socal coheson n the              in fishing, mining and oil exploration industries. Hence,
Organsaton of Eastern Carbbean States (OECS) such as              there must be a strengthenng of resource allocaton n these
poverty, unemployment, educaton, health and so on. The              areas for SIDS to become reslent to external shocks.
chapter hghlghts functonal lnkages between economc
Towards	the	Development	of	an	Economics	Resilience	                   conductng research on small states and prescrbng
Index                                                                 relevant development polces. Addtonal research work
         Lno Brguglo, Gordon Cordna, Nada                        s requred to better equp small states wth alternatve
Farruga and Stephane Vella developed a conceptual                   workable fiscal and monetary policy strategies to buffer
and methodologcal framework for the analyss and                     aganst external shocks, as well as to contan mcro and
measurement of economc reslence n the only chapter n             macroeconomc nstablty. Ths volume s useful n
ths secton. Most small states have a hgh GDP per capta            suggestng alternatve polces that would help SIDs
compared to other developng countres. Nevertheless,                 to boost ther economc reslence n the face of global
the lkelhood of external shocks on these economes                  economc shocks. Throughout each chapter the ratonale
are mmnent and the authors referred to the Sngapore                for the development of a reslence ndex s explaned.
paradox where a hgh GDP per capta rato was mantaned              Several aspects of vulnerablty and reslence were
n the face of hgh external shocks. The authors also found           proposed by the authors to gve the readers detaled and
that studes on economc vulnerablty provde evdence               relevant information on the subjects.
to support the reslence ndex, whch s based on export                      Evdently, Carbbean nsttutons were not pro-
earnng condtons and the openness of the economes.                 actve n the past n terms of addressng vulnerablty ssues
Therefore, both a vulnerablty ndex and a reslence                n the Carbbean. However, work towards the buldng of
ndex are needed. These two ndces gve an overall rsk              economc reslence ndces has started n the Carbbean,
ndcator, whch s mportant to all polcy nstruments.              more specifically, with the publication of the first Sub-
         The reslence ndex may be useful to decson               regonal Human Development Report (HDR) 2002, whch
makng through hghlghtng the mportance of reslence              also concded wth the new strategc plans of the OECS
buldng, the need for ntegrated acton and the dssemnaton        Secretarat that ncluded Socal and Human Development
of nformaton about reslence. In ths chapter the authors          polces. The report assessed how the nne OECS member
pnpont macroeconomc stablty, mcroeconomc market                states could acheve compettveness and mantan
efficiency, governance and social development, as the key             growth, and also analysed several aspects of vulnerablty.
areas of reslence. They further conclude that the hgh              Eventually, the ndcators of reslence, sustanablty and
level of GDP per capta of small states and slands may               disadvantage, went towards the adjustment of the United
not be explaned by an nherent vulnerablty or reslence           Natons Development Programme Human Development
to the vulnerablty they face. In fact, per capta GDP was           Index. Therefore, volumes such as the OECS HDR and
found to be more senstve to reslence varables than to            the revew book offer robust polcy proposals and analyss
vulnerablty varables.                                              whch could prove useful n the future development of a
                                                                      reslence ndex, especally when the Carbbean remans
Concluding	Remarks                                                    vulnerable because of small sze, trade mbalances,
Insttutons such as the Unversty of Malta and the                  envronmental degradaton and natural dsasters.
Commonwealth Secretarat have made great strdes n