Barbados's New Government Faces Economic Challenges

by Amanda Banks, Tax-News.com, London

22 January 2008

Standard and Poor's Ratings Services has reviewed the key challenges facing Barbados after the Democratic Labour Party won a decisive victory in the elections on 15th January.

In a report entitled, 'After the Elections: Challenges for Barbados Ahead', S&P finds that while fiscal restraint - a theme prevalent in the DLP's election manifesto - could improve creditworthiness, these policies will be difficult for the new government to manage as the Barbadian economy slows.

According to Standard & Poor's credit analyst Richard Francis, Barbados has one of the higher ratings in the Caribbean (a 'BBB+' long-term foreign currency sovereign credit rating), largely due to prudent economic policies instigated under the last government. These policies are unlikely to change much under the new government, he predicted.

"The government has played a central role in shifting the economic focus toward services from manufacturing and agriculture, and has taken important steps during the past three years to reform the pension system, improve the tourism infrastructure, and liberalize telecommunications," observed Mr. Francis.

He went on to add that "continuing challenges for the country are to increase tourism prospects and diversify into new service sectors in order to generate solid economic growth".

While Francis noted that a US slowdown would have the most direct impact on tourism – one of the key pillars of the country's economy - he suggested that Barbados would be likely to suffer less than other Caribbean destinations because of its lower reliance on the US market.

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