May 29 , 2006

REGIONAL ECONOMIC SUMMARY

The Caribbean region has shifted its main focus to the preparations for the Cricket World Cup 2007 (CWC). A construction boom is taking place as these countries ensure that stadiums and other infrastructure are put in place. The IMF expects the region to expand by 5.3% through the continued strength of the tourism industry to go along with the construction boom.

Jamaica is expecting growth of approximately 2% for 2006, a considerable improvement over the marginal performance from 2005. The sugar industry of Jamaica is being given assistance by Brazil to improve production. However, the nation has to be wary of the increasing concerns of the crime situation there.

The economy of Suriname is expecting growth of approximately 3.5% for 2006. The economy is likely to benefit from a continued increase in the demand of bauxite and alumina by the US and China, which will increase exports. The EU has also provided aid to the local banana industry to increase output for export purposes, which also serves to increase the number of jobs. The aid comes in place to assist the industry as the preferential access to the European market draws to a close. An additional loan from the Inter-American Development bank has also been granted for this cause to modernize the industry for increased efficiency and eventual privatization.

Guyana is expecting to recover from the floods from last year as it also expects to benefit from the increase in the demand for bauxite. The bauxite industry has also undergone privatization which is likely to boost the output of bauxite substantially that can help to reduce the trade deficit.

The economy of Trinidad and Tobago is expected to grow approximately 10% for 2006 as energy prices are expected to remain high during the year. Along with the start of production for Train IV at the LNG plant, construction activity is still on the rise which is contributing to the economy.

Inflation remains a contention in the economy at 6.5% year-on-year as at February 2006. While this rate was less than the previous month, it remains above the target range of 4-5% set by the Central Bank. Food prices have contributed significantly to inflation as they have risen by 19.3% y-o-y for February 2006 while core inflation has remained steady at around 2%. The Central Bank has further increased the ‘repo’ rate during the year in an effort to curb spending and reduce inflation. The ‘repo’ rate was mostly recently increased to 6.75% on March 28 2006 as the Central Bank continues to reduce spending. At the last ‘repo’ announcement, the rate was unchanged. Consumer credit facilities are still being accessed at high rates across the nation despite a reduction in overall credit growth.

In an attempt to absorb the liquidity pressure, the Central Bank has issued longer term debt instruments and increased the Treasury Bill yields by fifty (50) basis points. The Central Bank believes that monetary policy needs to remain tight to address inflationary pressure.

The crime rate is showing no signs of slowing down. In the first quarter of the year, there has been an increase in the criminal activity that is taking place countrywide. Foreign consulates are changing their tourist advisories to Trinidad and Tobago placing increased emphasis on the crime, which can damage the tourism sector in terms of both revenues and reputation.