2016 Index of Economic Freedom

Barbados

overall score68.3
world rank45
Rule of Law

Property Rights80.0

Freedom From Corruption74.0

Limited Government

Government Spending37.6

Fiscal Freedom75.8

Regulatory Efficiency

Business Freedom70.2

Labor Freedom67.3

Monetary Freedom80.8

Open Markets

Trade Freedom62.2

Investment Freedom75.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 0.3 million
  • GDP (PPP):
    • $4.5 billion
    • -0.3% growth
    • 0.1% 5-year compound annual growth
    • $16,183 per capita
  • Unemployment:
    • 12.0%
  • Inflation (CPI):
    • 1.9%
  • FDI Inflow:
    • $275.1 million
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With strong foundations of economic freedom supported by relatively low levels of corruption and an efficient judiciary, Barbados’s economic policies have attracted international companies. Relatively high regulatory efficiency facilitates private-sector growth, and offshore finance and tourism continue to be important sources of economic growth.

Economic Freedom Snapshot

  • 2016 Economic Freedom Score: 68.3 (up 0.4 point)
  • Economic Freedom Status: Moderately Free
  • Global Ranking: 45th
  • Regional Ranking: 7th in the South and Central America/Caribbean Region
  • Notable Successes: Regulatory Efficiency and Rule of Law
  • Concerns: Government Spending and Trade Freedom
  • Overall Score Change Since 2012: –0.7

Expansionary stimulus spending has had little impact on high unemployment but is causing inflation. Chronic fiscal deficits have increased government debt to a level equivalent to annual GDP. Foreign direct investment is up, but without deeper institutional reforms, future broad-based private-sector growth is likely to be constrained.

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Background

Barbados is a stable parliamentary democracy. Prime Minister Freundel Stuart, whose Democratic Labour Party won a five-year term in 2013, has announced that he wants the Caribbean island to become a republic in 2016, the 50th anniversary of its independence from the United Kingdom. Barbados has transformed itself from a low-income agricultural economy producing mainly sugar and rum into a middle-income economy built on tourism and offshore banking that generates one of the Caribbean’s highest per capita incomes. Fiscal consolidation measures adopted since 2014 have helped to stabilize the economy and contributed to a slight rebound in growth in 2015. Despite its success in cultivating a booming tourism sector, the government is trying to diversify the economy in order to reduce its external vulnerability.

Rule of LawView Methodology

Property Rights 80.0 Create a Graph using this measurement

Freedom From Corruption 74.0 Create a Graph using this measurement

Corruption is not a major problem in Barbados. There are criminal penalties for official corruption, and the government’s enforcement of anti-corruption measures is generally effective. The court system is based on British common law and is generally unbiased and efficient. The protection of property rights is strong, and the rule of law is respected.

Limited GovernmentView Methodology

The top income tax rate is 35 percent, and the top corporate tax rate is 25 percent. Other taxes include a value-added tax and a property tax. The overall tax burden amounts to 23.9 percent of total domestic income. Expansionary government spending has climbed to over 45 percent of total domestic output. With chronically high budget deficits averaging over 4 percent of GDP, public debt has risen to about the size of the economy.

Regulatory EfficiencyView Methodology

The regulatory framework generally facilitates entrepreneurial activity. With no minimum capital required, launching a business is relatively streamlined, but obtaining necessary permits remains time-consuming. Hiring and dismissal regulations are not burdensome. U.S. subsidies to rum producers in U.S. Caribbean territories negatively affect an economy already distorted by government energy subsidies and price controls on basic commodities.

Open MarketsView Methodology

Barbados has a relatively high 13.9 percent average tariff rate. Foreign investment in some sectors of the economy is limited; otherwise, foreign and domestic investors are generally treated the same under the law. The banking sector provides a wide range of services for domestic and foreign investors, although securities markets are relatively illiquid.

Country's Score Over Time

Bar Graph of Barbados Economic Freedom Scores Over a Time Period

Country Comparisons

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Regional Ranking

rank country overall change
1Chile77.7-0.8
2The Bahamas70.92.2
3Colombia70.8-0.9
4Saint Lucia70-0.2
5Saint Vincent and the Grenadines68.80.8
6Uruguay 68.80.2
7Barbados68.30.4
8Jamaica 67.5-0.2
9Peru67.4-0.3
10Costa Rica 67.40.2
11Dominica670.9
12El Salvador 65.1-0.6
13Panama 64.80.7
14Trinidad and Tobago62.9-1.2
15Guatemala 61.81.4
16Paraguay 61.50.4
17Dominican Republic610.0
18Nicaragua 58.61.0
19Honduras 57.70.3
20Belize57.40.6
21Brazil56.5-0.1
22Guyana55.4-0.1
23Suriname53.8-0.4
24Haiti51.30.0
25Ecuador48.6-0.6
26Bolivia47.40.6
27Argentina43.8-0.3
28Venezuela 33.7-0.6
29Cuba29.80.2
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