By CANDIA DAMES, Guardian News Editor

The government's borrowing will increase appreciably as a direct response to the current economic crisis, Prime Minister Hubert Ingraham announced last night.

A rising national debt, declining tourism figures, growing unemployment and a sharp increase in non-performing loans were other elements highlighted by Ingraham when he reported to the nation on the state of the economy.

"Unemployment is now a most serious concern," said the prime minister, in his first address to the nation since a financial crisis in the United States spread around the globe with substantial negative impact.

While he said the country is facing "a most difficult tourism season", the prime minister also pointed to possible trouble in the nation's number two industry: Financial services.

Noting that some major countries are advancing the "erroneous premise" that somehow the offshore centers are related to the current crisis, Ingraham said, "They will likely use the crisis to advance their anti-offshore financial center agenda."

He also reported that through the end of October, recurrent revenues were running slightly above the level of the same period last year, but added that more critically, they are roughly 10 percent below the level projected for this fiscal period.

"Given the extreme uncertainty as to when a resolution of the financial crisis and the rebound in global economic activity will occur, it is very difficult at this time to assess how revenues will progress over the balance of this fiscal year and into the next," he said. "...Therefore, in the circumstances, we must discipline ourselves accordingly, taking the appropriate defensive measures as and when they become necessary."

Ingraham said evidence of weakness in the economy is reflected in the deterioration in the asset quality of the banking system. He said non-performing loans — that is, loans on which payments have not been made for at least three months — have increased by nearly 40 percent. Another revealing indicator, the prime minister noted, is the ratio of loans in arrears to total claims outstanding which has risen to 10.4 percent in 2008, compared with 8.6 percent in 2007 and 7.6 percent in 2006.

He reported, however, that at October 31, 2008, foreign reserves stood at $626 million, one-third higher than at the same period last year, and domestic bank liquidity was about 50 percent higher.

Referring to the impact the current economic climate has had on another key indicator, Ingraham revealed that preliminary estimates placed the national debt at $3.2 billion at the end of last month — that's up 5.6 percent over the same month last year. This was a slightly accelerated rise in comparison to an increase of 4.7 percent in the 12 months ending October 2007, and was a reflection of elevated financing needs throughout the public sector, he said.

Additionally, Ingraham reported that foreign direct investment inflows at the end of September, in respect of tourism related projects, increased by more than 16 percent over the corresponding period last year while property purchases by international persons registered a decline.

In the domestic market, he said, mortgage loans from commercial banks and insurance companies for new home construction and repairs reported a 15 percent increase during the first half of the year. However, following moderate expansion earlier this year, construction activity is now subsiding, the prime minister noted.

"The growth of major investment inflows in resort and hotel development which we had anticipated is slowing down and a significant portion may not materialize for quite a while," Ingraham said.

"The slowdown and even cessation of direct foreign investment is due, not only to the uncertain outlook for tourism in the present environment, but also to the fact that many of the investors find it difficult to raise funds from their banking systems even for high quality investment purposes."