Central Bank of Barbados' Review of Barbados' Economy: January-March 2025

Barbados maintained its economic growth momentum in the first quarter of 2025. Real GDP increased by an estimated 2.6 percent, led by strong performances in tourism, business services and construction. Inflation continued its downward trend despite elevated global trade tensions. Unemployment claims fell during January and February, but temporary hotel closures in March, linked to major renovation projects, reversed this gain. Economic growth, together with stronger fiscal outcomes for FY2024/25, contributed to a further reduction in the debt-to-GDP ratio.

Gross international reserves increased, supported by private capital inflows. Reserves rose by $194.6 million to reach $3.4 billion at the end of March 2025, equivalent to 32.4 weeks of import cover. Although the current account deficit widened due to higher merchandise imports and income outflows, stronger private investment, particularly in tourism-related projects, more than offset those pressures.

Government met its fiscal targets for FY 2024/25 supported by stronger revenue collections and controlled spending. The primary surplus reached $662.8 million, or 4.6 percent of GDP, for the fiscal year. Corporation tax collections increased significantly, reflecting structural reforms and improved corporate profitability. Despite higher capital outlays and interest costs, the fiscal deficit narrowed to $87.1 million, or 0.6 percent of GDP.

The financial system remained stable and continued to support credit growth. Capital buffers remained well above regulatory requirements, non-performing loans (NPLs) declined, and liquidity levels stayed elevated. Credit to businesses and households increased, supported by strong deposit growth, ample liquidity, and sustained profitability in the banking sector.