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Barbados, Guyana and Jamaica Country Risk Report Q3 2015

  • May 2015
  • -
  • Business Monitor International
  • -
  • 53 pages

Core Views
We believe that most of the English-speaking Caribbean will continue to see a modest economic recovery in the coming quarters as the US growth story begins to gain ground. That said, even with a modest acceleration in growth, those countries most reliant on tourism and financial services will continue to struggle, as we expect these industries are unlikely to return to pre-crisis levels in the foreseeable future. Indeed, while we expect that lower precious metals prices will prompt a weakening macroeconomic outlook for the region's miners, growth will still be stronger than in the predominantly tourism-driven countries.

Caribbean economies will continue to face economic headwinds in the coming years in light of rising debt burdens, fixed exchange rate regimes, and modest growth prospects. These factors, combined with our view that neither the tourism nor financial services sectors will see a significant recovery in the next few years, mean that 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, it could send import bills much higher and potentially cause some countries to default on their outstanding oil loans.

Major Forecast Changes
W e forecast that growth in Barbados will accelerate from an estimated 1.1% contraction in 2014 to 1.8% in 2015 and 2.5% in 2016, these forecasts represent a change from our previous estimates and forecasts of 1.6%, 1.9% and 1.8% in 2014, 2015, and 2016 respectively. This will be driven by a lack of domestic demand, limiting import demand, as well as a strengthening tourism sector. We have revised our current account forecast for Barbados on the back of rising tourism arrivals and tepid household consumption
growth stemming from the government's austerity programme. This will drive a narrowing of the current account shortfall to a forecasted 7.7% of GDP in 2015, from an estimated 8.6% in 2014.

Table Of Contents

Barbados, Guyana and Jamaica Country Risk Report Q3 2015
Regional Executive Summary 13
Core Views 13
Major Forecast Changes ..13
Key Risk To Outlook 13
Chapter 1.1: Political Outlook - Barbados 15
Domestic Politics. 15
Fracturing Opposition Will Enable Continued Austerity...15
Barbados' ruling party, the Democratic Labour Party (DLP), will continue to move ahead with its legislative agenda, specifically its
austerity measures, in the years ahead.
TABLE: Strong Policymaking Position Keeps Risks Low15
Long-Term Political Outlook... 16
Social Stability and Drug Trafficking Greatest Challenges To Stability..16
Well-established democratic institutions, strong policy continuity and limited external threats will maintain broad political stability in
Barbados over the coming decade.
Chapter 1.2: Economic Outlook - Barbados 19
Balance Of Payments... 19
Tourism Rebound Will Bolster Foreign Investment...19
Barbados' current account shortfalls will narrow in the years ahead as rising tourist arrivals bolster services exports and a public sector
wage freeze tempers import demand.
TABLE: Current Account19
Fiscal Policy.. 21
Fiscal Consolidation Will Continue On Improved Government Efficiency..21
Barbados' fiscal deficit will narrow in 2015 as wage freezes lead to a decline in government expenses and stronger economic growth
bolsters revenues.
Chapter 1.3: 10-Year Forecast - Barbados... 23
The Barbadian Economy To 2024... 23
Q3 2015: A Decade Of Weak Growth Ahead...23
Barbados will struggle with slow growth, a wide current account deficit and weak government fiscal dynamics over our 10-year forecast
TABLE: Long-Term Macroeconomic Forecasts.23
Chapter 2.1: Political Outlook - Guyana... 27
Domestic Politics 27
Tensions With Venezuela To Increase In The Coming Quarters..27
Guyana's long-running dispute with Venezuela over ownership of the resource-rich Essequibo region is likely to heat up in the months
ahead. That said, the increased tensions are unlikely to substantially stymie foreign direct investment into Guyana.
Long-Term Political Outlook... 28
Social Challenges and Security Threats Weigh On Outlook.28
Guyana will face a number of significant social obstacles over the course of our 10-year forecast period, such as ethnic tensions,
policymaking deadlock and high levels of poverty.
Chapter 2.2: Economic Outlook - Guyana 31
Economic Activity 31
Mining Sector Weakness To Weigh On Growth.31
The Guyanese economy is set to slow in the coming years on the back of lower gold prices.
Balance Of Payments... 32
Lower Gold Prices To Narrow Financial Account Surplus32
Guyana's current account deficit will narrow in 2015, even despite the widening goods trade shortfall, on the back of rising tourist
arrivals and increased remittance inflows.
TABLE: Current Account32
Chapter 2.3: 10-Year Forecasts - Guyana 35
The Guyanese Economy To 2024... 35
Q3 2015: A More Difficult Decade For Growth35
In the coming decade, Guyana will face broad-based macroeconomic deterioration with weaker growth, widening current account
deficits and rising fiscal account shortfalls.
TABLE: Long-Term Macroeconomic Forecasts.35
Chapter 3.1: Political Outlook - Jamaica.. 39
Strengthening Ties With China Will Bolster Investment...39
Jamaica will benefit from China's attempts to increase its influence in the Caribbean region, in the form of expanding bilateral trade and
substantial infrastructural investments.
Long-Term Political Outlook... 40
Social Challenges To Foment Most Pressing Political Risks...40
We expect that general agreement among Jamaica's political leaders regarding policy direction will promote political stability over the
coming years.
Chapter 3.2: Economic Outlook - Jamaica... 43
Economic Activity 43
Strong Import Growth and Low Spending Will Temper Rebound43
The Jamaican government remains on track to improve its business environment and restore macroeconomic stability to the country,
meeting all the benchmarks set by the IMF.
Monetary Policy 44
Inflation To Remain Low Amid Favourable External Factors44
Jamaican headline inflation will remain below the central bank's target throughout 2015, due primarily to supply-side dynamics.
Chapter 3.3: 10-Year Forecasts - Jamaica... 47
The Jamaican Economy To 2024 47
Q3 2015: Government Reforms To Support Stronger Growth..47
Under the guidance of the IMF, the Jamaican economy will begin to consistently post positive growth figures over the coming decade.
TABLE: Long-Term Macroeconomic Forecasts.47
TABLE: Simplification A Major Theme Of Tax Overhaul..48
Chapter 4: BMI Global Macro Outlook... 51
Global Outlook.. 51
EMs Still Slowing...51
Table: Global Assumptions..51
Table: Developed States, Real GDP GrowtH, %52
Table: Emerging Markets, Real GDP Growth, %...53

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