‘Uncertain’ economic outlook despite growth momentum: IDB

The Barbados economy is showing modest but uneven progress as the island moves beyond its IMF programme, with the Inter-American Development Bank (IDB) warning that medium-term growth remains fragile despite gains in tourism and construction.

On the whole, the economic outlook in the medium term remains uncertain, according to a new report from the IDB Group.

The latest edition of the Caribbean Economics Quarterly said that real GDP growth for 2025 was revised down by the International Monetary Fund (IMF) from 3 per cent in April to 2.7 per cent in October.

“Even though Barbados is benefiting from above-average winter seasons, the competition from other tourism destinations is high, and more consistency is needed year-round,” advised the December 2025 report entitled How Are External Forces Impacting Trade, Growth and Investment in the Caribbean?

It said that despite recent easing of trade tensions, delayed pass-through effects could materialise in the near future due to inflationary pressure in the United States, increasing the price of imported products to Barbados.

But the report warned: “On the domestic side, despite progress made in recent years, public debt remains elevated, and investment needs are large, especially in light of the country’s vulnerability to climate change. Lastly, the conclusion of the IMF programme in June 2025 brings some uncertainty regarding the continuity of implementation of the reform agenda.”

The document also reports that the economy of Barbados has continued its growth momentum in 2025, but the recovery has been slow.

“Real GDP growth is forecast to be 2.8 per cent, and real GDP is expected to surpass its peak of 2008 by the end of the year. Following the onset of the global financial crisis, Barbados faced years of low growth and recurrent fiscal deficits.”

The review noted that in 2018, the country embarked on a transformation journey with support from the IMF. Despite initial progress, the country was severely affected by the COVID-19 pandemic due to its high dependence on the tourism sector. Its strong commitment to the reform agenda in the years since has been a key factor in driving the recovery.

“Growth so far in 2025 has been strong, buoyed by tourism. Real GDP grew 2.7 per cent in the first nine months of 2025,” according to the IDB Group.

The report also said that the main sectors contributing to the expansion were tourism, construction, and business and other services. The tourism sector grew by 9 per cent year-on-year. Visitor arrivals in the first nine months were 7.3 per cent higher than in the same period in 2019, with a particularly strong showing in the first quarter.

On the construction front, the sector expanded by 6.1 per cent, spurred by a variety of projects in the hotel, residential and commercial sectors, as well as public investment in roadworks and cultural heritage sites. Business and other services rose by 3.1 per cent, and agricultural output increased significantly, by 10.1 per cent, although its contribution to the economy remains low.

The report said exports in Barbados are well diversified geographically. The trade deficit stood at 2.8 per cent of GDP in 2024 and is expected to deepen to 3.5 per cent in 2025.

It acknowledged that Barbados is a net exporter of services, particularly tourism, and a net importer of goods.

“Within tourism exports, the Barbados Statistical Service reports that visitors come mainly from the United Kingdom and the United States, followed by Canada. Regarding goods, the main trading partner is the United States, which was the destination of 17 per cent of domestic exports and the source of 41 per cent of total imports of goods on average between 2020 and 2024.”

It explained that the main export product is rum, which accounted for 17 per cent of goods exports during that same period and was equivalent to 0.7 per cent of GDP. Margarine and sweet biscuits each accounted for 5 per cent of domestic exports.