Revised Approach to Estimating Barbados’ GDP

Estimates of the gross domestic product (GDP) are the most important indicator of a country’s overall macroeconomic performance. GDP measures the total value of all final goods and services produced in an economy during a specific period of time, usually a year.

It has been the practice in Barbados that the Barbados Statistical Service prepares annual estimates of nominal GDP measured using the current market prices of a particular year. The Central Bank of Barbados produces annual and quarterly estimates of real GDP, which involves holding current market prices constant relative to the prices in a particular base year. In other words, real GDP focuses on the measurement of the “physical” amount of final goods and services, without taking into account the price fluctuations of those goods and services.

Notwithstanding the ongoing collaborative approach to GDP estimation taken by the Statistical Service and the Central Bank, including the annual reconciliation of both GDP series, the conventional practice internationally is that the official statistical agency produces estimates of both nominal and real GDP. Therefore, following an extensive consultative process, the Statistical Service has enhanced its approach to the estimation of GDP, which includes, inter alia, the production of annual estimates of real GDP. In particular, the revision of the methodology for estimating real GDP included updating the base year for prices to 2010, to better reflect the pricing structure of the current economy.

The revised real GDP figures prepared by the Statistical Service for the period 2006 to 2017 are to be official estimates of real GDP for Barbados. As a result, the real GDP data previously produced by the Central Bank will be discontinued in its current form. During its quarterly report on economic performance, the Central Bank will provide “provisional” estimates and indicators of sectoral economic activity, pending the release by the Statistical Service of more detailed real GDP estimates.

The table below shows a comparative breakdown of the economic sectors and corresponding sectoral weights of the real GDP estimates produced by the Statistical Service and the Central Bank. The Statistical Service real GDP data have more detailed coverage and revised sectoral weights, compared to the Central Bank data, which are based on 1974 prices. Of note, the revised levels of real GDP are higher and the changes in sectoral weights reveal that the largest economic sector, Business and Other Services, now comprises a combination of business, real estate, financial and insurance and other professional and general services. This accounts for 35% of total real output, compared to 20% using the Central Bank’s sectoral distribution. The Statistical Service has also revised its preliminary estimates of nominal GDP and by extension the Central Bank updated its associated historical ratios to GDP, as is the usual practice when new or revised data become available.