Outlook for Barbados' Economy in 2024

The Barbados economy is projected to remain on its growth trajectory throughout 2024, hinged on the continued expansion of tourism as well as private and public investments. The economy is now larger in both real and nominal terms than before the occurrence of the COVID-19 pandemic. Further growth of around 3.9 percent is projected for 2024, contingent on additional expansion in arrivals and continued investment in the economy.

Government incentives to agriculture could improve the sector’s output in 2024, but adverse weather conditions could affect this outturn. The introduction of a new domestic feed producer is expected to provide an alternative source of feed for farmers. The 2024/25 Budgetary Proposals and Financial Statement (BPFS) included incentives for local milk producers to increase output through tax rebates. Orders of young chickens are on the rise, and capacity is expected to expand further with new pens under construction that should begin operation later in the year. However, adverse weather conditions are expected to persist and climate shocks could continue to have a negative impact on general agricultural production.

The tourism sector is poised to experience another productive period. The second quarter of 2024 is expected to exceed tourist arrivals registered in the comparable period for 2023, bolstered by the hosting of the ICC T20 World Cup and improved air access. Forward bookings up to the mid-point of 2024 stand above last year’s tally, and the market should benefit from increased seating capacity with additions to existing and new routes. Cruise traffic between June and August is slated to restart for the first time since 2021, with 12 cruise calls scheduled for this period. Long-stay tourist arrivals are predicted to reach pre-pandemic levels by the end of the year, while in transit cruise passenger arrivals are expected to reach approximately 75 percent of the pre-pandemic average. Downside risks could present themselves via upward movements in ticket prices and potential disruptions from the hurricane season.

Risks to the outlook remain balanced for 2024, with steady growth and disinflation in the world economy. The April World Economic Outlook forecasts a more gradual economic slowdown than previously anticipated, accompanied by an upward revision to global growth prospects. Nonetheless, international growth is projected to linger below the historical average of 3.8 percent for the period spanning 2000-2019. This subdued trajectory is attributed to heightened central bank policy rates aimed at curbing inflation, the gradual withdrawal of fiscal support measures, and underlying lower productivity growth. Several downside risks persist, including geopolitical conflicts in various regions, constraints in freight supply, and prolonged tight monetary conditions driven by strategies to manage inflation. These global developments have the potential to influence the tourism outlook for Barbados and contribute to imported inflation pressures.

Domestic inflation is projected to moderate over the medium term, moving in tandem with falling international commodity prices. The 12-month moving average inflation rate is expected to moderate between 3.5 and 4 percent by the end of 2024, underpinned by falling international food prices and moderating oil prices. However, the inflation forecast remains susceptible to disruptions in the supply chain, stemming from ongoing international events, such as the Russia-Ukraine War, the Israel-Hamas conflict, tensions in the Red Sea, and persistent congestion in the Panama Canal. Furthermore, the occurrence and severity of adverse weather conditions domestically could lead to localised food shortages and exacerbate food price inflation. Nevertheless, ongoing negotiations for trade agreements with CARICOM countries aimed at bolstering commodity trade hold the potential to contribute to inflation moderation over the medium term.

Gross international reserves are expected to maintain a healthy position at the end of 2024. Continued growth within the tourism sector, complemented by the hosting of major sporting events, including the 2024 ICC Men’s T20 World Cup, is expected to bolster tourism receipts and improve the current account. Moreover, private foreign investment inflows, particularly linked to the tourism sector, along with public sector inflows from multilateral development banks, are anticipated to sustain international reserves at a level equivalent to an import cover well above the accepted international benchmark of 12 weeks.

Public sector reforms and growth enhancing initiatives are expected to strengthen Government’s ability to achieve targeted primary surpluses while supporting domestic economic activity.  The recently delivered budget speech focused on enhancing fiscal discipline and promoting economic growth. Restructuring of SOEs, including the dissolution of the Barbados Agricultural Management Corporation (BAMC), the amalgamation of the Rural and Urban Development Corporations (RDC and UDC) into the newly formed National Development Commission (NDC), and the reform of the National Housing Corporation (NHC), are expected to reduce overlap and achieve financial and operating efficiencies in the medium-term. Moreover, the digitisation of the public sector and the creation of a National Data Centre, led by the newly established Gov Tech, also aim to improve the efficiency of public sector services. Additionally, the reform and modernisation of the corporation tax structure, aimed at meeting the Organisation for Economic Co-Operation and Development (OECD) Inclusive Framework Global Rules, are anticipated to yield a net tax positive impact on the medium-term revenue outturn. The 2024 budget speech also outlined planned public sector investments, such as road and water infrastructure projects, the ongoing construction of the Geriatric Hospital, refurbishments to public health facilities, and the construction of sporting facilities, as well as measures geared towards improving climate resilience, and promoting sustainable and inclusive economic growth. The success of these and other fiscal initiatives are crucial to achieving the targeted primary balances necessary for ensuring debt sustainability in the medium and long-term.

The debt-to-GDP ratio should continue its downward and sustainable trajectory. The renewed interest in the domestic securities market alongside external borrowing are expected to assist in financing the Government’s needs. Despite the increase in debt over the period, the expansion in economic activity and sustained primary surpluses are expected to pave the way for achieving the 60 percent debt target by FY2035/36.

The financial system is expected to remain strong. NPLs are projected to remain at low levels and profitability should remain relatively stable. Furthermore, robust economic activity throughout the year, should lead to increased demand for credit. Notwithstanding the expected increase in imports, deposits are earmarked to grow during the year, on account of improved labour market conditions.

To ensure that the economic growth becomes inclusive and sustainable, all stakeholders must collaborate and seize the opportunities available on the market. As Barbados charts its course towards a more prosperous economic future, the imperative for action is crystal clear. Both public and private stakeholders must seize the opportunities outlined in the BERT 2022 Plan, with a keen focus on sustainable investments in tourism, infrastructure, and energy. Particularly, the private sector should capitalise on opportunities for expansion and innovation, especially amidst emerging global challenges. Embracing change collectively, fostering investments, and supporting reforms are essential steps to safeguarding a resilient and flourishing Barbadian economy in the years to come.