Outlook for Barbados' Economy

Barbados’ economy is set to maintain its growth momentum through year-end, with real GDP expanding by approximately 3.8 percent. This expansion will be driven by ongoing private and public sector investments, particularly in tourism and utility infrastructure. Additionally, the digitisation of public and private operations is anticipated to enhance efficiencies, reduce costs, and boost productivity across industries. Workforce development initiatives, focused on technical skills enhancement, are also expected to strengthen economic resilience. 

The tourism sector shows strong potential for the winter season, with forward bookings for air travel in the fourth quarter up 9 percent over the same period in 2023. The England cricket tour of the West Indies should boost visitor arrivals, while cruise activity is expected to surpass last year’s figures, given an 11.5 percent increase in scheduled cruise calls for the final quarter.

While economic growth prospects remain positive, several downside risks could temper these projections. The October 2024 World Economic Outlook projects steady global growth at 3.2 percent, driven by advanced economies such as the United States and Canada and emerging markets like China and India. However, slower-than-expected global growth may reduce export demand and tourism from key source markets. High airline ticket prices may also dampen tourism demand, limiting the sector’s growth. Additionally, climate-related risks remain significant, as increased hurricane, flood, and storm activity could disrupt travel, damage infrastructure, and weaken the agricultural sector.

The domestic inflation rate is expected to slow further, with the 12-month moving average stabilising between 2 and 3 percent by year-end. This forecast assumes easing international food and energy prices from their 2022 peaks. However, global challenges, including escalating geopolitical tensions, potential oil price hikes, and disruptions related to the Red Sea crisis and Panama Canal water shortages could increase freight costs and impact supply chains. Domestically, adverse weather could further strain agricultural output, pushing up local food prices.

The external position is projected to remain strong, backed by solid tourism bookings and foreign domestic investment inflows from commercial and tourism-related construction projects. These elements are expected to reinforce the country’s foreign exchange reserves, supporting sustainable, inclusive economic growth over the medium term. 

The Government remains committed to enhancing service provision and business processes. Plans are underway for a central online platform to digitise government services and replace paper-based workflows across departments. This shift is expected to boost productivity, reduce costs, and increase revenue collection through streamlined compliance. Additionally, the use of a unique identifier across the National Insurance and Social Security Service, the Barbados Revenue Authority, and the Customs Department is intended to improve compliance and reduce redundancies.

The debt-to-GDP ratio is expected to continue on its downward trajectory, supported by sustained economic growth and primary surpluses. The target for debt reduction by FY2035/36 remains on track. The recent federal funds rate cut may also yield favourable impacts on external interest rates, potentially reducing government interest expenses. 

The financial sector is forecasted to remain stable through 2024, with robust capital adequacy levels. Credit is anticipated to grow, underpinned by increased activity in the real estate market and business investment. Loan delinquency rates are expected to decline further amid lower commodity prices and sustained economic activity. While liquidity in the financial system should remain high, an expected increase in imports could moderate deposit growth in the last quarter. 

Proactive engagement across all sectors remains essential to navigate challenges and capitalise on emerging opportunities. By prioritising investment in tourism, real estate, education, digitisation, and innovation, Barbados can support sustained growth. Achieving this vision will require coordinated efforts across the public and private sectors, civil society, and international partners to build resilience, enhance living standards, and secure a prosperous future for all Barbadians.