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- GDP (PPP):
- $4.6 billion
- 0.5% growth
- 0.3% 5-year compound annual growth
- $16,575 per capita
- Inflation (CPI):
- FDI Inflow:
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. However, increased government spending has expanded the state’s influence within the economy, and a large fiscal deficit has made government debt larger than the size of the economy.
Government economic policies are focused on attracting international companies. Regulatory efficiency facilitates private-sector growth. Transparency levels the playing field for domestic and foreign businesses despite certain restrictions on foreign investment. However, policies intended to buttress open trade and productivity growth are undercut by bureaucracy, discouraging investment expansion.
Barbados was uninhabited when first settled by the British in 1627. African slaves worked the sugar plantations until 1834 when slavery was abolished. Independent from the United Kingdom since 1966, Barbados is a stable parliamentary constitutional monarchy. Prime Minister Freundel Stuart of the center-left Democratic Labour Party won a five-year term in 2013. Stuart wanted Barbados to become a republic in 2016, the 50th anniversary of its independence from the U.K., but the public views that politically complicated process as a low priority as the country continues its struggle to recover from years of economic stagnation. Tourism receipts have improved, but serious challenges to medium-term economic growth remain.
Property registration in Barbados is very time-consuming. 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. Corruption is not a major problem in Barbados, but violence related to transshipment drug trafficking from Venezuela is a serious problem.
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 equals 27.4 percent of total domestic income. Government spending has amounted to 45.1 percent of total output (GDP) over the past three years, and budget deficits have averaged 9.1 percent of GDP. Public debt is equivalent to 103.0 percent of GDP.
Transparent policies and straightforward laws generally facilitate regulatory efficiency. The overall process for obtaining licenses and starting a business is not burdensome. The labor market remains relatively flexible, and employers are not legally obligated to recognize unions. To meet a 2017 deadline set by the World Trade Organization, the government took steps in 2016 to phase out subsidies to manufacturing firms.
Trade is important to Barbados’s economy; the value of exports and imports taken together equals 81 percent of GDP. Government finances are heavily reliant on tariffs, and the average applied tariff rate is 13.9 percent. The investment climate has improved, but much investment activity is subject to government approval. The banking sector provides a wide range of services for investors, although securities markets are relatively illiquid.