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- GDP (PPP):
- $7.1 billion
- 0.0% growth
- -0.6% 5-year compound annual growth
- $25,373 per capita
- Inflation (CPI):
- FDI Inflow:
Barbados’s economic freedom score is 68.3, making its economy the 45th freest in the 2014 Index. Its score is 1 point worse than last year due to deterioration in government spending, labor freedom, and business freedom. Barbados continues to be ranked 6th out of 29 countries in the South and Central America/Caribbean region, and its overall score remains well above the global and regional averages.
Over the 20-year history of the Index, Barbados has advanced its economic freedom score by 6 points. This modest overall gain has been driven by advancements in half of the 10 economic freedoms including trade freedom, fiscal freedom, freedom from corruption, and property rights. A high degree of regulatory efficiency has facilitated private-sector activity, and offshore finance and tourism continue to be important sources of economic growth.
However, in other critical areas of economic freedom such as investment freedom, financial freedom, and monetary freedom, Barbados has lost ground over the history of the Index. In particular, significantly increased public spending in recent years has led to chronic fiscal deficits. Expansionary government stimulus spending has had little impact on high unemployment, and inflation has increased.
Barbados is a parliamentary democracy and member of the British Commonwealth. Political stability is expected to continue under Prime Minister Freundel Stuart, whose Democratic Labour Party holds a very narrow parliamentary majority following elections in February 2012. Barbados has been transformed in recent decades 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 highest per capita incomes in Latin America. However, tourist arrivals have declined in recent years. The financial services and construction industries were also hit hard during the 2008 global economic crisis, causing economic growth to remain below 1 percent.
In 2013, the central bank issued new guidelines to increase transparency for financial institutions licensed to operate in Barbados. The court system is based on British common law and is generally unbiased and efficient. There are criminal penalties for official corruption, and enforcement of anti-corruption measures is generally effective. The protection of property rights is strong, and the rule of law is respected.
The top individual income tax rate is 35 percent, and the top corporate tax rate is 25 percent. Other taxes include a value-added tax (VAT) and a property tax. The overall tax burden has risen to 27.4 percent of GDP. Government spending is 41 percent of the economy, and public debt is about 73 percent of GDP. Slow growth and a sustained debt level are putting pressure on public finances.
The overall regulatory framework supports entrepreneurial activity. Launching a business takes less than 10 procedures, and there is no minimum capital requirement. Labor regulations are relatively flexible, although enforcement can be lax. The government maintains price controls on basic commodities such as rice and flour, transportation, and fuel.
Barbados has a relatively high 14.7 percent average tariff due to its reliance on tariff revenue to finance the government. Foreign exchange is regulated by the government. In general, foreign and domestic investors are treated equally under the law. The banking sector provides a wide range of services for domestic and foreign investors, although securities markets are relatively illiquid.