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

The Barbadian economy sustained its growth trajectory, despite intensifying global risks. Real GDP expanded by an estimated 2.5 percent during the first half of 2025, driven by strong activity in construction, business & other services, wholesale & retail trade, and tourism. The country held its growth trajectory even as geopolitical tensions escalated and global trade conditions worsened. This momentum pushed the unemployment rate down to a record low of 6.3 percent in the first quarter.  

Barbados’ external position improved in the first half of 2025, supported by increased foreign investment, and a strong tourism performance. Foreign investment rose sharply, reflecting improved investor confidence and increased financing to both the public and private sectors. These inflows helped to offset a widening current account deficit, which reflected higher merchandise imports, increased profit repatriation, and a marginal decline in corporation tax receipts from financial global business companies, even as travel receipts posted strong gains. As a result, international reserves expanded by $695.2 million, reaching a record $3.9 billion, equivalent to 37.4 weeks of import cover, and well above the international benchmark. 

Government continued to strengthen its fiscal position during the first quarter (April to June) of FY2025/26. Higher income and transaction-based tax receipts outpaced spending on wages & salaries, goods & services, transfers & subsidies, and capital investment. This performance generated a fiscal surplus of $372.9 million, equal to 2.4 percent of GDP, and a primary surplus of $530.9 million, or 3.5 percent of GDP. Economic growth and the fiscal surplus lowered the debt-to-GDP ratio to 102 percent, a decline of 0.9 percentage points compared to the end of FY2024/25. 

The financial sector remained stable and well capitalised, supporting the overall macroeconomic performance. Stronger loan repayment and modest growth in private sector credit reflected the continued expansion of economic activity. At the same time, deposit growth continued to sustain liquidity in the financial system. Higher interest income supported the continued profitability of deposit taking institutions (DTIs), which maintained capital buffers above the regulatory minimum.