Six Key Points from the Central Bank of Barbados' Review of the Economy (January-September 2023)

1. Barbados’ economy expanded by 4.4 percent in the first nine months of 2023, the largest nine-month expansion since 2006, excluding the pandemic recovery period. This performance also accounts for the tenth consecutive quarter of economic growth. Broad-based growth boosted tax collections[1], improved labour market conditions, reduced the debt-to-GDP ratio, narrowed the trade deficit, increased foreign reserve levels, and improved credit quality as well as bank profitability.
2. Tourism activity continued to spur Barbados’ economic expansion during the first three quarters of 2023. Intensified marketing campaigns in key source markets, increased airlift, sporting events, and a full return to Crop Over festivities fuelled the continued recovery in the tourism sector. The growth in the tourism industry boosted construction and other non-traded activities. Overall, non-traded sectors contributed just over half of real GDP growth.
3. Barbados’ external position strengthened. The current account deficit narrowed by $156.1 million relative to the comparable period of the previous year, resulting in a deficit of $805.9 million. An upswing in tourism receipts and a decline in the value of imports led to this outturn. The external position also benefited from increased policy-based loan inflows. Consequently, the gross international reserves expanded by $88 million to reach $2.9 billion, equivalent to 30.3 weeks of imports of goods and services.
4. Government achieved its primary surplus target set under the BERT-2022 IMF-supported programme. The continued improvement in economic activity coupled with the timely transfer of taxes levied on external transactions contributed to this outcome. However, a shift in the timing of taxes on profits and properties offset some of the revenue gains. Higher interest costs, transfers to state-owned enterprises (SOEs) as well as increased wages and salaries pushed up spending. These developments led to Government recording a primary surplus of $274.9 million (2.1 percent of GDP), with a target of $218 million, and an overall fiscal deficit of $61.1 million (or -0.5 percent of GDP).
5. The debt-to-GDP ratio declined further over the review period. The ratio fell to 115.4 percent on account of increased economic activity. The debt stock expanded by approximately $187.7 million, primarily reflective of inflows from multilateral institutions for budgetary and developmental purposes, along with the private sector’s uptake of Government securities.
6. Economic growth was the reason for improved financial sector indicators over the first nine months of 2023. This performance was marked by increased credit to businesses and robust financial stability indicators. The business sector borrowed more from commercial banks, leading to 1.7 percent growth in total credit from deposit-taking institutions (DTIs) to the non-financial private sector (NFPS). Deposits grew more slowly than in the comparable period a year earlier, because of higher drawdowns to facilitate loan repayments, households’ travel, increased imports by businesses, and larger holdings of Government securities by individuals and businesses. Credit quality continued to strengthen, while capital adequacy and liquidity ratios remained elevated.

[1] Adjusted for corporation taxes prepayment and the late issuance of land tax bills.

Reprinted from the Central Bank of Barbados’ Review of the Barbados Economy: January-September 2023.