Bridgetown --- 31 Oct. 2006 (BarbadosAdvocate.com): THE Barbadian economy is forecasted to grow by between 3.5 per cent and four per cent in 2006, propelled by the continued strong expansion in the non-traded sectors. In particular, construction activity, transportation, storage and communications services, wholesale and retail trade, and business and other services should underpin the growth in the non-traded sectors, in the lead up to the Cricket World Cup in 2007.

According to Central Bank Governor Dr. Marion Williams, traded sector activity is expected to pick up on account of higher projected tourist arrivals, es-pecially in the first half of 2007. Willams was at the time delivering a review of the economy for the first nine months of 2006, which occurred yesterday at the Central Bank.

According to her, the average rate of unemployment should remain below ten per cent for the remainder of 2006 and into 2007. Inflationary pressures are also expected to ease somewhat, though she noted that this assumption hinges on the continued moderation of international oil prices as predicted by global analysts.

Nonetheless, even with a forecasted slowdown in credit growth, Williams said that the elevated price levels may hamper deposit accumulation, keeping the rate of growth of deposits below that of credit. Conse-quently, liquidity conditions should remain constrained, though the rapid tightening observed since 2004 is not anticipated in the short- to medium-term.

Despite the increased demand associated with Cricket World Cup 2007, which should place some upward pressure on the level of imports, growth in retained imports is forecasted to remain below the 6.7 per cent averaged for the last five years. Domestic exports are forecasted to grow at a moderate pace, while travel credits should grow in line with tourist arrivals. Consequently, the external current account deficit as a percentage of GDP should hover around 11.7 per cent, marginally below the 11.9 per cent recorded in 2005," she pointed out.

She added that the capital and financial account is expected to remain buoyant in 2006. However, the significant reserve outflows experienced in the second quarter, in particular, would be difficult to recoup by the end of the year; therefore, a net reserve loss is anticipated in 2006. The situation is forecasted to improve in the first half of 2007, however, boosted by earnings related to the hosting of the Cricket World Cup.

In the short- to medium-term, therefore, the import cover should continue to decline, especially in light of higher projected debt service payments. Despite increased interest payments, however, the growth in government current expenditure is expected to moderate. Coupled with higher tax collections, the fiscal deficit should contract in 2006 and the first half of 2007," she stated.