Reserve Risks Raised

The drop off in domestic demand in Barbados in 2009 is borne out by latest trade data, which show that imports into the island dropped 22.6% year-on-year (y-o-y) in October. Going forward, we believe that imports will begin to pick as the domestic economy enters the recovery stage, and are currently pencilling import growth of 7.0% in 2010. However, we caution that, with growth in the country's main foreign exchange earners - namely tourism and financial services - set to remain subdued this year, such an uptick is likely to place added pressure on the island's international reserve levels, which have already recorded negative year-on-year growth for 13 consecutive months.

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