according to an Economist Intelligence Unit (EIU) report. The EIU is a subsidiary of The Economist magazine.

The EIU's "Country Update'' of Bermuda is provided through the Bloomberg News service.

"Despite a strong promotion campaign in the USA, the number of tourist arrivals in 1996 was only marginally higher,'' the EIU states in its report.

"Reductions in tourist accommodation in the coming year ...will ensure further decline, and this in turn will have an impact upon already sluggish retail sales. International business registrations, on the other hand, will continue their steady upwards trend, boosted by expected improvements in telecommunications and the virtual abandonment of the Independence issue by both political parties.'' The EIU forecasts a two percent growth rate for the Island over the next two years. The report notes the proposal to establish an electronic insurance-risk exchange in Bermuda. The BSX would then become the first in the world to allow electronic trade in risk-related derivatives.

In contrast to its gloomy analysis of Bermuda, the EIU's is more upbeat about the Bahamas and Barbados, the two other islands covered in its "Americas'' section. It forecasts the Bahamas' economy to grow at about 3.5 percent a year for the next two years.

"Not only will tourist arrivals continue to increase on the back of relatively strong US growth and as new projects come on stream, but the shipping industry is also set to benefit from the opening of a new container transshipment terminal while a cruise ship repair facility is under consideration,'' the report states.

The EIU forcasts Barbados' economy to grow at between 3.8 percent and 3.5 percent over the next two years. The report notes that the Island's domestic manufacturing sector will be hit by the removal of protective trade taxes.

"Government capital expenditure and strong investment in the tourism sector will continue to boost construction activity, however, and will ensure a moderate level of growth,'' the report states.

Barbados, however, has an expected annual inflation rate of about 4.7 percent for this year, while Bermuda's inflation rate is expected to be at about 2.5 percent.

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