Outlook for Barbados' Economy in 2025

Barbados’ economy is poised for sustained growth in 2025 and beyond. An annual average real GDP expansion rate of 3 percent is anticipated in the short to medium term. This projection hinges on continued investments by both the public and private sectors, as well as ongoing improvements in productivity and competitiveness. Investments in key sectors such as tourism, business, utility infrastructure, renewable energy, and food security, are expected to support sustainable growth, stimulate construction activity, and create jobs. Efforts to modernise systems to streamline processing times and reduce administrative burdens will further enhance the business environment and support higher productivity. Additionally, targeted training programmes and capacity-building initiatives will equip the workforce with the skills required to thrive in emerging industries.

The tourism sector is poised for another strong year in 2025, building on its robust performance in 2024. The demand for Barbados' tourism offerings during the winter season remains robust, with increased forward bookings for the first quarter of 2025.  Additionally, cruise ship activity is expected to exceed the 2024 level, with 34 more cruise calls scheduled for 2025. These developments are expected to support growth in related sectors such as accommodation, transportation, and entertainment, and also contribute significantly to foreign exchange earnings and job creation across the economy.

Global economic conditions will significantly influence Barbados’ growth prospects. The January 2025 World Economic Outlook projects global growth to stabilise at 3.3 percent by year-end, driven by advanced economies such as the USA, the Euro Area, and Canada. These developments are expected to bolster demand for Barbados’ goods and services, particularly in tourism and trade. However, risks such as slower global growth, elevated inflation, and trade disruptions—especially in key markets like the UK—could limit these benefits. Geopolitical tensions and the rising frequency of climate-related disasters, further underscore the need to further build for economic resilience. 

Climate resilience and international partnerships are vital for sustainable growth. Barbados remains vulnerable to climate-related risks, including natural disasters and rising sea levels, which pose significant threats to key sectors like tourism and agriculture. To mitigate these risks, the Government is advancing climate resilience initiatives such as renewable energy projects, sustainable tourism practices, and investments in disaster preparedness. The country’s active engagement with multilateral institutions and development partners provides access to technical assistance, concessional financing, and investment opportunities. Initiatives like the debt-for-climate swap and collaborations with global climate fund organisations, demonstrate Barbados’ commitment to addressing climate challenges while promoting sustainable growth. Strengthened relationships with key trading partners and regional organisations will further enhance economic resilience by improving market access and fostering new avenues for investment.

Domestic inflation is expected to slow, supported by moderating global commodity prices.  The 12-month moving average inflation rate is projected to range between 1.5 and 2.5 percent for 2025 and 2026, driven by easing international food and energy prices. However, global risks such as rising geopolitical tensions and disruptions to supply chains, including the ongoing Red Sea crisis and Panama Canal water shortages, could lead to higher freight costs. On the domestic front, unfavourable weather conditions may further limit agricultural production, potentially increasing local food prices. The recent importation of livestock is expected to partially mitigate the impact of rising costs on the dairy industry.

The Government remains committed to fiscal and debt sustainability. The Government is dedicated to meeting fiscal targets through increased revenue and careful spending. Gains in corporation tax performance, along with the adoption of global tax rules, provide upside potential for revenues. These efforts are expected to enable continued investment in infrastructure and climate resilience, while also supporting early debt repayment. Sustained economic growth and fiscal surpluses will drive the debt-to-GDP ratio downward, to a target of 60 percent by FY2035/36. The US Federal Funds Rate is forecast to decrease in the short to medium term, potentially leading to reduced interest rates on existing and projected external debt. In the domestic market, opportunities for Government securities are expected to expand, fostering the development of a yield curve that informs investment decisions by stakeholders and investors. 

Financial soundness indicators will remain strong, supported by credit expansion in key economic sectors. Continued growth in construction activity and other strategic investments are expected to drive credit expansion, boosting overall economic activity. Banks and finance companies are projected to maintain robust capital adequacy and liquidity levels, ensuring stability within the financial system. As economic conditions continue to improve, the level of non-performing loans is anticipated to decline further. 

As Barbados charts its course towards inclusive and sustainable economic growth, collaboration and innovation will be critical. Public and private sector investments will remain central to achieving the nation’s economic objectives, fostering resilience, and creating long-term prosperity. Tourism and renewable energy sectors offer transformative opportunities. The integration of sustainable practices and operational efficiency in tourism can enhance visitor experiences and strengthen Barbados’ position as a premier global destination. Similarly, accelerating investments in renewable energy infrastructure will reduce fossil fuel dependence, generate employment, and stimulate local industries. By prioritising innovative solutions and leveraging public-private partnerships, Barbados can unlock its full economic potential and secure a future that is both inclusive and resilient.