Central Bank of Barbados' Review of Barbados' Economy: January-June 2026

Barbados’ economy continued to expand during the first half of 2026, with domestic sectors again leading growth. Real GDP grew by an estimated 1.4 percent, as the non-traded sector expanded by 1.5 percent. Business and other services drove that expansion, with wholesale and retail trade also contributing and construction recording modest growth. The traded sector also expanded by 0.4 percent. Tourism value added, which accounts for about half of traded output, remained close to its level a year earlier. Long-stay arrivals edged higher, but shorter average stays reduced visitor nights. Agriculture added to growth, while manufactu ring output remained broadly unchanged. Domestic activity therefore sustained overall economic growth in a more challenging global environment marked by heightened geopolitical tensions, trade uncertainty, and softer demand in several key tourism source markets.

 Labour market indicators remained broadly favourable, while inflation rose from a low base but remained contained. The unemployment rate stood at 6.1 percent at end-March 2026, approximately 0.2 percentage points below its level a year earlier, and unemployment claims fell by 3.7 percent during January to June. The labour force also contracted by 2,700 persons as the number of retirees increased, so the lower unemployment rate reflected both a reduction in the number of unemployed persons and lower labour force participation. The 12-month moving average inflation rate reached 1.4 percent, while point-to-point inflation rose to 2 percent in May 2026, as higher prices for food, education, housing and utilities, and transport pushed the rate up. Government policy measures continued to cushion the domestic pass-through of external cost pressures. 

Barbados maintained strong external buffers, reinforcing its resilience to external shocks. International reserves increased by $91.8 million from the end of December 2025 to $3.1 billion, equivalent to 25.9 weeks of import cover and comfortably above the internationally accepted adequacy benchmark. The current account deficit narrowed to $189.4 million, as stronger net current transfers and a narrower income deficit more than offset a wider merchandise trade deficit and a smaller services surplus.

Government comfortably exceeded its first primary balance floor under the BERT 2026 programme. The overall fiscal surplus reached $347.4 million and the primary surplus $537.5 million at the end of June 2026, with the primary surplus $353.5 million above the programme floor.[1] Government preserved substantial surpluses while increasing spending on goods and services, public institutions, and capital projects. Although both surpluses narrowed relative to the corresponding period of FY2025/26, the primary surplus remained well above the programme floor.

Sustained primary surpluses and continued economic growth kept public debt on its downward trajectory. Gross public sector debt stood at $15.1 billion at the end of June 2026, $250.8 million below the ceiling set under the BERT 2026 programme. The debt-to-GDP ratio declined by 1.1 percentage point to 93.7 percent, from 94.8 percent at the end of FY2025/26.

Improved asset quality, ample liquidity, and strong capital buffers kept financial system conditions sound. Credit to the non-financial private sector and deposits expanded by 2.8 and 2.7 percent, respectively, during the first six months of the year. Loan quality strengthened further, with the stock of non-performing loans (NPLs) declining and the NPL ratios for commercial banks and finance companies falling to 3.4 percent and 6.4 percent, respectively. Capital and liquidity positions remained comfortably above regulatory requirements.

The priority for the remainder of 2026 is to translate this stability into stronger traded-sector performance. These buffers provide the platform, but broadening the base of growth and supporting the full-year outlook will require faster execution of major investment projects, higher productivity, and improved export competitiveness.

[1] The IMF Executive Board approved a 36-month precautionary Stand-By Arrangement for Barbados on 22 June 2026, equivalent to SDR 189 million, or about US$257 million.