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East Caribbean Business Forecast Report Q1 2014

  • November 2013
  • -
  • Business Monitor International
  • -
  • 49 pages

Core Views

We expect a modest economic recovery in most of the East Caribbean
region in the coming quarters, anticipating that the region’s more
diversified economies will see a boost from slightly stronger global
growth, while those more heavily reliant on tourism and financial
services will continue to struggle.
We believe that Caribbean economies will continue to face economic
headwinds in the coming years, owing to rising debt burdens, fixed
exchange rate regimes, and modest growth prospects. Moreover,
given our expectation that neither the tourism nor financial services
sectors will see a significant recovery in the foreseeable future, we
do not rule out additional credit events or major balance of payments
corrections in some of the small island economies.
Should the Venezuelan government significantly alter the terms of
its Petrocaribe programme, which provides subsidised oil imports
to many Caribbean economies, could send import bills much higher
and potentially cause some countries to default on their outstanding
oil loans.

Table Of Contents

East Caribbean Business Forecast Report Q1 2014
Composite Rating 5
BMI Risk Ratings - Barbados 6
BMI Risk Ratings - Guyana 7
BMI Risk Ratings - Trinidad and Tobago 8
BMI Ratings - East Caribbean Table 9
Caribbean SWOTS 10
Executive Summary 13
Core Views 13
Major Forecast Changes 13
Key Risks To Outlook 13
Chapter 1 1: Political Outlook - Barbados 15
Domestic Politics 15
Fiscal Reforms At Risk 15
While we generally believe that Barbados' fiscal reform package is a much-needed step in the right direction, we see growing risk that
the austerity measures will face intensifying political opposition As such, we have downgraded the Policy-Making Process component
of the country's Short-Term Political Risk score
Chapter 1 2: Economic Outlook - Barbados 17
Banking Sector 17
Banking Sector Stability Ahead Despite Headwinds 17
The Barbadian commercial banking sector is likely to confront several quarters of weaker asset growth, as sluggish economic activity
weighs on deposit and loan growth That said, the sector is relatively well capitalised, and we do believe the sector will remain relatively
stable over the medium term
TABLE: ECONOMIC ACTIVITY 17
Chapter 2 1: Political Outlook - Guyana 19
Foreign Policy 19
Tensions Over Territorial Dispute Likely To Continue 19
The Venezuelan navy's recent decision to detain a ship sailing in disputed waters has reignited a long standing territorial dispute
between Guyana and Venezuela Guyana's desire to develop its hydrocarbons resources, continued populist rhetoric in Venezuela,
and questions over the political staying power of Venezuelan President Nicolás Maduro mean that the tensions could rise again in the
coming months
Chapter 2 2: Economic Outlook - Guyana 21
Balance Of Payments 21
Weak Gold Prices To Continue Weighing On External Sector 21
Guyana's balance of payments data for Q113 confirmed that the downside risks to our forecasts stemming from weakening gold and
sugar prices in recent months, two important exports for the country, are beginning to play out
TABLE: CURRENT ACCOUNT 21
Chapter 3 1: Political Outlook - Trinidad and Tobago 23
Domestic Politics 23
Local Election Results Highlight Vulnerabilities Of Ruling Coalition 23
The ruling United National Congress (UNC) party's poor showing in local elections on October 21 will negatively affect Prime Minister
Kamla Persad-Bissessar's ability to make policy through the remainder of her term to May 2015
TABLE: Political Overview 23
Chapter 3 2: Economic Outlook - Trinidad and Tobago 27
Economic Activity 27
Q213 Data Reinforces Moderate Economic Recovery View 27
Slightly stronger real GDP growth in Trinidad and Tobago during the first half of 2013 has reinforced our view that the twin islands'
economic recovery will continue at a moderate pace in the coming months, primarily on the back of a rise in non-energy output
Moreover, we expect that increased short-term investment in the country's energy sector due to recent tax reform will also bolster the
economy through 2014
TABLE: MACROECONOMIC DATA AND FORECASTS 27
Chapter 4: Regional 29
Economic Activity 29
Still Trouble In Paradise, Four Years On 29
TABLE: Regional Real GDP Growth, % 29
Key Sector Outlook 32
Tourism Weakness Will Drag On Regional Economic Growth 32
We expect that tourism industry growth throughout the Caribbean, traditionally a key driver of economic activity, will continue to slow in
the years ahead, keeping real GDP growth relatively subdued Moreover, while we expect some countries to outperform, weak fiscal
revenues and higher borrowing costs will limit the capacity of most governments in the region to reverse the trend in slower growth
TABLE: Regional GDP and Tourism Growth Forecasts 33
Chapter 5: Country Summaries 37
St Lucia 37
Economic Activity 37
TABLE: st lucia MACROECONOMIC FORECASTS 37
Grenada 39
Economic Activity 39
TABLE: grenada MACROECONOMIC DATA AND FORECASTS 39
St Kitts And Nevis 41
Economic Activity 41
TABLE: SAINT KITTS AND NEVIS-FISCAL POLICY 41
Suriname 43
Economic Activity 43
TABLE: suriname MACROECONOMIC DATA AND FORECASTS 43
Suriname 43
Saint Vincent 45
Economic Activity 43
TABLE: st vincent MACROECONOMIC FORECASTS 45
Chapter 6: BMI Global Assumptions 47
Global Outlook 47
Table: Global Assumptions 47
Table: Developed States, Real GDP GrowtH, % 48
Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, % 48
Table: Emerging Markets, Real GDP Growth, % 49

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