Econ 101

Topics: Monetary policy, Public finance, Bretton Woods system Pages: 2 (595 words) Published: March 16, 2014
Barbados and its Economic Challenges
Tourism emerged as the dominant industry in Barbados in the 1970’s, replacing the sugar industry as the main foreign exchange earner. It is estimated that tourism currently accounts for 54% of the country’s foreign exchange earnings and 14% of its Gross Domestic Product (GDP). Approximately, 10% of the labour force is employed in the industry. Barbados currently has the highest Human Development Index in the Caribbean region and its GDP per capita of US$16,150 places it among the top tier income countries in Latin America and the Caribbean. However, at this juncture the country faces serious economic challenges. In the aftermath of global financial crisis the Barbadian economy has struggled to get back on a path of growth. Since 2008, the economy has contracted by an average annual rate of 0.8% and in 2013 it shrank by 0.7%. The 508,520 tourist arrivals the country saw in 2013 was 11.2% below the level registered in 2007.

While for a long time the country has operated a fixed exchange rate system at US$1 = BDS$2 some analysts have question the sustainability of its exchange rate. Its net international reserves have plummeted from US$718 million in 2010 to US$563 million at the end of 2013. Over the same period its debt to GDP ratio moved from 70.3% to 94%. This rapid accumulation in public debt is explained by a surge of expansionary spending which caused the budget deficit to widen and it is expected to reach 9.6% at the end of the 2013/14 fiscal year. Furthermore, according to Bloomberg, a New York based financial data and media company, the “yields on the country’s 2022 dollar bonds have climbed to 9.93 percent this week from 6.27 percent a year ago.” Previously Barbados has had two Stand-by Agreements (1982 and 1992) with the International Monetary Fund (IMF). However, it seems reluctant to enter into a new loan agreement with the institution. At the end of 2013 the IMF in an assessment of the...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • ROOM 101 Essay
  • ECON 101
  • Econ 101 sample exam Essay
  • ECON Essay
  • econ Essay
  • Econs Essay
  • Econ 101 Intro notes Essay
  • Essay about Econ 101 Submit

Become a StudyMode Member

Sign Up - It's Free