Outlook for Barbados Economy (Updated September 2025)

Growth momentum is expected to strengthen and points to a clear medium-term path. Economic growth is projected to end 2025 at 2.7 percent, underpinned by continued activity in the areas of tourism, construction activity, wholesale and retail trade and business and other services. Over the medium term, real growth trends toward 3 percent per year on the strength of tourism diversification, steady public and private investment in infrastructure and housing, expansion of the digital economy, and targeted productivity reforms. These drivers, together with resilient domestic demand and stable macroeconomic management, will keep Barbados on a durable growth path.

Tourism, construction, and business services should continue to lead the next stage of expansion. Scheduled events, improved connectivity, and additional airline capacity from the United States, Europe, and CARICOM should lift long-stay demand, while high vessel occupancy and an active itinerary pipeline will support cruise traffic. Spillovers will benefit accommodation, dining, transport, and cultural services. A solid investment project pipeline in transportation, utilities, housing, renewable energy, and water management is expected to sustain construction activity, and ongoing upgrades in technology and innovation should strengthen business and other services.

Digital transformation and productivity reforms are expected to sustain medium-term growth. Government and the private sector continue to scale digital infrastructure, modernise payments through BiMPay, and expand online government services. Simplified business start-up requirements and skills development should raise efficiency and competitiveness, improving the ease of doing business and lifting potential output over the medium term.

Global conditions have softened yet still support Barbados through stable demand and easing inflation. According to the October 2025 World Economic Outlook, global growth is projected to slow to 3.2 percent in 2025 and 3.1 percent in 2026, with Latin America and the Caribbean around 2.4 percent in 2025 and 2.3 percent in 2026. The IMF also projects global headline inflation near 4.2 percent in 2025 and 3.7 percent in 2026. Trade policy uncertainty and elevated tariffs keep risks tilted to the downside, but gradual disinflation and resilient consumption in major partners continue to support travel and external demand for Barbados.

Strong buffers, including international reserves of $3.3 billion and a credible policy framework, help Barbados manage external shocks while protecting confidence and investment. Higher capital inflows to the public and private sectors, together with strong travel credits, offset import related pressures and keep reserve coverage well above prudential norms. Reserve levels may ease as construction and job gains lift imports, yet coverage remains sufficient to meet debt service, essential import needs, and to cushion against external shocks.

Domestic inflation is anticipated to remain low and stable. The local inflation rate declined markedly during the first eight months of 2025, tilting the year’s outturn towards the low-end of the forecast range, at around 1 percent. Increased oil production by OPEC+ members is signalling potential oil price decreases for the remainder of the year and into early 2026, which could favourably influence domestic inflation. However, persistent geopolitical tensions in key oil-producing regions remain a significant downside risk. Additionally, tariffs recently passed by the U.S. Government on its trading partners are likely to transmit inflationary pressures to Barbados. Potential spikes in shipping costs and weather-related disruptions to local food production could also present temporary upward risks to the inflation outlook. All considered, the 12-month moving average inflation rate is likely to settle near the lower end of the forecast range between 1.0 and 2.5 percent by year-end. This relatively low inflationary environment will help preserve domestic purchasing power and support confidence in the economy.

Fiscal prudence and debt sustainability are central pillars of the Government’s public financial management strategy. Government continued to maintain substantive primary surpluses aided by solid tax performance and prudent expenditure management. The focus remains on utilising any year-end surplus to reduce public debt, while also supporting public investment. This approach aligns with Barbados’ broader growth strategy as outlined under the Barbados Economic Recovery and Transformation (BERT) programme. BERT 2025 is expected to build on this foundation, advancing the Government’s ongoing reform agenda with renewed emphasis on state-owned enterprise (SOE) reform, productivity enhancement, and the transformation of both traditional and emerging economic sectors. These efforts bode well for accelerating growth and achieving Government’s long-term debt anchor of 60 percent of GDP by FY2035/36.