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Barbados, Guyana and Jamaica Country Risk Report Q2 2015

Barbados, Guyana and Jamaica Country Risk Report Q2 2015

Core Views

We believe that most of the English-speaking Caribbean will continueto see a modest economic recovery in the coming quarters as theUS growth story begins to gain ground. That said, even with a modestacceleration in growth, those countries most reliant on tourismand financial services will continue to struggle, as we expect theseindustries are unlikely to return to pre-crisis levels in the foreseeablefuture. Indeed, while we expect that lower precious metals prices willprompt a weakening macroeconomic outlook for the region’s miners,growth will still be stronger than in the predominantly tourism-drivencountries.

Caribbean economies will continue to face economic headwinds inthe coming years in light of rising debt burdens, fixed exchange rateregimes, and modest growth prospects. These factors, combinedwith our view that neither the tourism nor financial services sectorswill see a significant recovery in the next few years, mean that wedo not rule out additional credit events or major balance of paymentscorrections in some of the small island economies.

Should the Venezuelan government significantly alter the terms ofits Petrocaribe programme, which provides subsidised oil imports tomany Caribbean economies, it could send import bills much higherand potentially cause some countries to default on their outstandingoil loans.

Major Forecast Changes

We have revised our current account forecasts for Jamaica afterstronger than anticipate services exports and more modest goodsimports in H114 – a trend we believe is likely to continue in the comingyears. We noWestimate that the full-year 2014 current account deficitwill come in at 6.5% of GDP, significantly narrower than our previousprojection of 7.9%, and we expect that the shortfall will continue toshrink over the course of the next several years, coming in at 6.2%of GDP and 5.5% in 2015 and 2016 respectively (compared to ourprevious forecast of 8.3% and 7.5%).

We have revised up our 2015 real GDP growth forecast for Barbados,from 1.1% to 2.1%, reflecting our view that lower oil prices and astronger than anticipated US growth story will offer tailwinds to theBarbadian economy.

Regional Executive Summary
Core Views
Major Forecast Changes
Key Risk To Outlook
Chapter 1.1: Political Outlook - Barbados
Domestic Politics
Government Policymaking To Be Unhindered By Opposition
Barbados' ruling Democratic Labour Party will continue to set the country's policy agenda in 2015, with opposition within the National
Assembly and from local unions remaining limited in scope and effectiveness.
Long-Term Political Outlook
Social Stability And Drug Trafficking Greatest Challenges To Political Stability
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
Economic Activity
Low Oil Prices Provide Tailwind For Private Consumption And Investment
Barbados' real GDP growth will accelerate in the coming years on the back of tailwinds from low oil prices and rising tourist
Balance Of Payments
Increased Tourist Arrivals To Bolster Reserves
Starting in 2015, Barbados' balance of payments dynamics will improve as the country's current account deficit narrows and foreign
direct investment heads higher.
TABLE: Current Account
Chapter 1.3: 10-Year Forecast - Barbados
The Barbadian Economy To 2024
Q2 2015: A Decade Of Weak Growth Ahead
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
Chapter 2.1: Political Outlook - Guyana
Domestic Politics
Policymaking To Remain Challenging Post Election
Guyanese President Donald Ramotar's decision to call general and local elections on May 11 will stem further deterioration in the
country's political risk profile.
Long-Term Political Outlook
Social Challenges And Security Threats Weigh On Outlook
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. This will only be exacerbated by the rising presence of narcotraffickers, such that we
rank the country as having one of the most challenging long-term political outlooks in the Caribbean region.
Chapter 2.2: Economic Outlook - Guyana
Economic Activity
Lower Commodity Prices To Temper Growth
Guyana's real GDP growth will slow in the coming quarters. Low commodity prices will temper mining and agricultural sector activity,
and this will increasingly feed through to weaker consumer and business confidence, weighing on the services sector.
Balance Of Payments
Current Account Deficit To Drag On Foreign Reserves
Structurally lower oil prices and rising gold production will narrow Guyana's sizeable current account deficit in the quarters ahead.
However, sluggish investment will ensure the country is occasionally forced to dip into its foreign reserves, even despite the improved
external account dynamics.
Chapter 2.3: 10-Year Forecasts - Guyana
The Guyanese Economy To 2024
Q2 2015: A More Difficult Decade For Growth
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
Chapter 3.1: Political Outlook - Jamaica
Domestic Politics
Crime Reduction To Prove Slowgoing
A renewed focus on community policing in Jamaica will reduce violence marginally in the near term. However, more substantive
improvements to the security environment will take longer, as they depend on rooting out organised crime syndicates and addressing
the lack of viable economic opportunities on the island.
Long-Term Political Outlook
Social Challenges To Foment Most Pressing Political Risks
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
Balance Of Payments
External Headwinds Beginning To Subside
Following a considerable improvement in the outlook for Jamaica's trade in goods and services, we have significantly upgraded our
current account forecasts for the country over the next several years.
Chapter 3.3: 10-Year Forecasts - Jamaica
The Jamaican Economy To 2024
Q2 2015: Government Reforms To Support Stronger Growth
Under the guidance of the IMF, the Jamaican economy will begin to consistently post positive growth figures over the coming decade.
Fiscal adjustments, tax reform and improvements in external account dynamics will all help to support economic activity.
TABLE: Long-Term Macroeconomic Forecasts
TABLE: Simplification A Major Theme Of Tax Overhaul
Chapter 4: BMI Global Assumptions
Global Outlook
Weaker EMs To Weigh On Growth
Table: Global Assumptions
Table: Developed States, Real GDP GrowtH, %
Table: Emerging Markets, Real GDP Growth, %

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