Press Release No. 10/355

Press Release No. 10/355
September 24, 2010

Marcello Estevão, chief of an International Monetary Fund (IMF) mission to Barbados, released the following statement today in Bridgetown, at the end of the IMF team’s yearly visit to review the Barbadian economy:

“Barbados has been severely affected by the global economic crisis. The deep global recession has curbed tourism, affecting related activities such as construction and trade which, in turn, depressed aggregate demand and raised unemployment. Despite a variety of policy measures to alleviate the impact of the crisis, the level of economic activity is expected to remain broadly unchanged in 2010. The team expects a return to moderate growth thereafter, as tourism receipts remain constrained by weak consumption growth in the United States and the United Kingdom.

“With public deficits and public debt now at high levels, the emphasis has shifted to fiscal consolidation. The team strongly supports the authorities’ aim, as set out in the Medium-Term Fiscal Strategy, to put public debt firmly on a downward path. Such a correction will be crucial to maintain domestic and external stability and growth, and to support Barbados’ external credit rating, but will require substantive measures on several fronts to control current spending and increase tax revenues. These measures could be accompanied by further actions to limit the impact on the poorest. The team commends the authorities for their prudent management of foreign reserves.

“While the banking system remains well capitalized, there has been a significant rise in nonperforming loans as a result of the recession. Against this background, continued close monitoring remains appropriate, which will be aided by the recent creation of a financial stability unit in the Central Bank of Barbados and intensified bank reporting requirements. The team supports a quick resolution of CLICO Barbados. It also welcomes the authorities’ decision to strengthen supervision of nonbank financial institutions, including through consolidation of supervisory agencies into the planned Financial Services Commission, and improvements in methods and human capital in this area.”