Updated Outlook for Barbados' Economy in 2025

Real GDP growth for 2025 is projected at 2.7 percent, revised down from the 3 percent forecast at the start of the year. Despite solid first-quarter momentum, global headwinds warranted a modest downward adjustment. Growth is expected to be led by tourism, construction, and business services, although weaker global conditions and ongoing trade tensions present downside risks. Nonetheless, Barbados’ domestic fundamentals remain solid and should continue to support moderate expansion. 

Fiscal measures introduced in the 2025 Budget are expected to support growth and resilience. The temporary removal of VAT and import duties on inputs for restaurants and cookshops, along with food and beverage concessions for hotels, should reduce operating costs and stimulate consumption. Climate-resilience initiatives in agriculture, including vertical farms and broiler tunnels, aim to enhance food security. Investments in technological upgrades and public-sector modernisation should improve productivity. Amendments to the Co-operative Societies Act, allowing credit unions to invest in renewable energy, real estate, and tourism, are expected to broaden domestic investment channels. Training and capacity-building initiatives will help equip the workforce for a rapidly evolving global economy.

Tourism is expected to remain a key growth driver, although risks remain. Event-driven demand from Crop Over and international sporting events is likely to sustain long-stay arrivals, while increased airlift and seven additional cruise calls should bolster overall activity. However, economic uncertainty in key source markets, particularly the U.S., may dampen tourism spending. The sector will continue to play a central role in foreign exchange earnings and broader economic performance.

Global trade-related developments could weigh on Barbados’ economic prospects. The April 2025 World Economic Outlook lowered global growth projections from 3.3 percent to 2.8 percent, reflecting slower expansions in major economies including the US, UK, Canada, and China. Rising trade tensions – particularly broad-based tariffs and job losses in the US – threaten to dampen consumer demand, with potential spillovers for Barbados through reduced tourism, exports, and remittances. Given the country’s reliance on U.S. travellers and imports, these risks remain material. However, recent developments have helped mitigate some concerns: Caribbean countries have secured exemptions from proposed U.S. port fees on Chinese-built vessels, and a 90-day pause on most global tariffs offers a temporary reprieve.

The inflation forecast for 2025 has been revised upward to between 1.7 and 3.5 percent. Barbados remains exposed to imported inflation, particularly through food and fuel sourced from the US Although recent tariffs have been delayed, pass-through effects are still expected to place upward pressure on consumer prices. Inflation could also re-emerge if shipping fees are reinstated, though the Caribbean’s exemption from Chinese-built vessel port charges has eased that risk. Local food prices remain sensitive to weather variability and global commodity trends, despite continued investment in climate-resilient agriculture.

International reserves are projected to increase modestly in 2025, supported by tourism receipts and private investment. While the current account deficit is expected to widen, continued inflows from travel and tourism-related capital projects should support further reserve accumulation. However, growth in reserves may slow compared to 2024. Close monitoring of external conditions – particularly US demand, interest rates, and shipping costs – will be essential to safeguarding external stability.

Fiscal planning for FY2025/26 focuses on maintaining surpluses and reducing debt. With the conclusion of its second IMF-supported programme, Government is targeting a primary balance of 4.4 percent of GDP, following the 4.6 percent achieved in FY2024/25. A new concessions platform is expected to strengthen tax administration and reduce leakages. Planned amalgamations of state-owned enterprises should enhance efficiency and lower transfers over time. The rollout of a new public-private partnership framework will support infrastructure delivery while mobilising private capital.

The financial sector is expected to remain resilient. Credit to the private sector is projected to increase steadily, supported by ongoing labour market improvements. Banks and finance companies are expected to maintain robust capital buffers, while liquidity levels should remain elevated. Financial stability indicators continue to point to a healthy and sound system. 

Barbados is poised to meet its medium-term goals, but the moment demands bold, deliberate action. The home-grown Barbados Economic Recovery and Transformation (BERT) programme, along with the “Investment in Prosperity and Resilience” plan, continues to chart a path toward inclusive, climate-conscious growth. Key priorities, ranging from population ageing and crime to food security and supply chain resilience, require sustained regional collaboration and innovation. As the global landscape grows more fragmented, Barbados must remain anchored in its values of discipline, unity, and strategic foresight. Now is the time to invest: in ourselves, in our productive capacity, in the next generation, and in the projects that will define our economic future. This is not only an opportunity, but a responsibility, to rise above division, lead with intention, and shape a resilient and distinctly Barbadian future.