Notes to Consolidated Financial Statements - Barbados Investment ...

to US$41/barrel —down nearly 70% from July peaks—while nonenergy
prices fell nearly 40%. Demand for most commodities slowed
or declined.
According to the World Bank’s assessment, Europe and Central Asia
have been most adversely affected by these developments. Following
a 4.2% growth in 2008, GDP in this region is expected to contract 2%
in 2009. The US economy expanded by only 1.4%, its slowest growth
rate since 2001, and was accompanied by significant shedding of
labour, particularly in the manufacturing and construction sectors.
Economic growth is projected to decline by 1.6% in 2009. GDP in
Latin America and the Caribbean, while expanding 4.3% in 2008 is
also projected to contract by 0.6%. Several of these countries have
strong ties with the U.S. financial system and many companies felt
immediately the impact of the credit crunch. Terms of trade for
commodity exporters are projected to plummet, pressuring budgets
for a number of countries. Some of these countries had failed to build
up sufficient buffers during the commodities boom, but had instead
used the high commodity prices to overheat their economies.
was largely the result of two major factors:
1. The capability of firms to invest has been reduced by a fall in
access to financial resources, both internally due to a decline in
corporate profits) and externally due to lower availability and
higher cost of finance.
2. The propensity to invest has been affected negatively by
economic prospects, especially in developed countries that are
hit by a severe recession.
In addition, a very high level of risk perception led companies to
extensively curtail their investment plans.
The growth rate of FDI inflows to developing countries, while lower
than in 2007 (when it exceeded 20%), however remained positive
for 2008 at an estimated 4%. FDI flows to Latin America and the
Caribbean showed significant resilience to the world economic
slowdown and were estimated to have increased by 13% in 2008 to
reach US$142.3 billion.
On the whole global GDP is expected to contract by 1.7% in 2009.
The Organisation for Economic Cooperation and Development (OECD)
member economies are likely to contract 3% and other high-income
countries 2%. GDP among developing economies should register
at around 2.1%. Volumes of world trade in goods and services are
expected to drop 6.1% in 2009, with a significantly sharper contraction
in trade volumes of manufactured products 4 .
Global Investment
The year 2008 marked the end of a growth cycle in international
investment that started in 2004 and saw world foreign direct investment
(FDI) flows reach a historic record of US$1.8 trillion in 2007.
Due to the impact of the on-going worldwide financial and economic
crisis, FDI flows declined by an estimated 15% in 2008. The decline
Declines in investment were however registered for Barbados.
According to the BIDC’s quarterly Employment & Investment survey,
foreign investment in the manufacturing and services sectors fell from
BDS$7.9 million to BDS$7.2 million during the period April 2008 to
March 2009.
A further decrease in FDI flows is projected for 2009. In the face of a
global economic recession, tighter credit conditions, falling corporate
profits, gloomy prospects and uncertainties for global economic
growth, many companies have announced plans to curtail production,
lay off workers, and cut capital expenditures, all of which tend to
reduce FDI. The impact of the crisis is projected to continue to vary
widely depending on region and country. Central America and the
Caribbean, which are traditionally highly dependent on the United
States economy, are expected to register a decline in FDI flows in the
coming year.
BARBADOS INVESTMENT AND DEVELOPMENT CORPORATION ANNUAL REPORT 2009 11