WASHINGTON (CMC):

The International Monetary Fund (IMF) is predicting a 'favourable' economic outlook for Barbados this year.

The Washington-based financial institution said that the economy of the island, which has one of the highest per capita incomes in the region, has been growing at a solid pace.

"Robust output growth of about four per cent is expected to continue this year, supported by tourism and construction.

"Inflation, which was pushed up in 2006 by higher energy prices and a temporary import surcharge, is set to decelerate to 5.5 per cent in 2007," it added.

deficit too high

But the IMF said the current account deficit, despite having narrowed in 2006, is still high and projected to remain unchanged at about 8.5 per cent of gross domestic product.

The international lending agency said macroeconomic policies were tightened significantly in 2006 and nominal interest rates were raised in line with U.S. rates.

It said, though real interest rates declined, financial conditions tightened as a result of an appreciating real exchange rate.