IMF official warns of tough times ahead, but optimistic

BRIDGETOWN, Barbados, February 14, 2008 - The Deputy Manager of the International Monetary Fund (IMF) has concluded a visit to the Caribbean, expressing satisfaction with the measures put in place by Barbados and countries of the Eastern Caribbean to sustain growth. At the same time, Murilo Portual made it clear that these economies have to continue to be on alert.

During a visit to the region that ended yesterday, the IMF official indicated that Barbados is "well-placed to reap the benefits of globalization" but warned that with a small and open economy, it still had to protect itself from the deteriorating global environment.

"While the times ahead may prove challenging, I am confident that the government of Barbados will tackle such challenges with skill and resolve," he said after ending his visit to that island on February 11.

The senior IMF official also reiterated the fund's commitment to deliver technical assistance to the Caribbean for another three years. He said that assistance will allow the Caribbean Regional Technical Assistance Center (CARTAC) to continue providing high-quality capacity building to the public sectors in 21 Caribbean countries across several areas, such as public financial management; tax and customs; financial sector supervision; capital market development; macroeconomic management; and statistics.

Mr Portugal who also met with the Finance Ministers of the Eastern Caribbean Currency Union (ECCU) and the St. Kitts and Nevis authorities on his first visit to the Eastern Caribbean as the IMF's Deputy Managing Director said he was pleased with the commitment of member governments to placing fiscal balances on a firmer footing by implementing measures such value-added taxes and efforts to overhaul government expenditures, focused on enhancing efficiency of capital spending and civil service reform.

"These efforts will be key to lowering debt levels and strengthening the currency union," he said.

Mr Portugal however noted that despite recording higher revenues, limited progress has been made towards fiscal consolidation, and the regional debt ratio remains above 100 percent of GDP.

"Our forecast is for a soft landing of the ECCU economy in 2008, but there are important downside risks. Turbulence in U.S. asset markets and slowing global growth could weaken the outlook in the tourism and construction sectors," he cautioned.

"Efforts to sustain rapid growth are thus particularly important, and I was encouraged to learn about ongoing reforms intended to improve the investment climate, financial market development, and continuing regional integration."

"I wish the governments and people of the Eastern Caribbean Currency Union every success in their efforts to achieve strong, sustainable growth and continued social advances," Mr Portugal said.