2017 Index of Economic Freedom

Barbados

overall score54.5
world rank130
Rule of Law

Property Rights55.5

Government Integrity34.3

Judicial Effectiveness33.0

Government Size

Government Spending39.0

Tax Burden74.0

Fiscal Health0.0

Regulatory Efficiency

Business Freedom69.6

Labor Freedom67.7

Monetary Freedom83.7

Open Markets

Trade Freedom62.2

Investment Freedom75.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 0.3 million
  • GDP (PPP):
    • $4.6 billion
    • 0.5% growth
    • 0.3% 5-year compound annual growth
    • $16,575 per capita
  • Unemployment:
    • 12.3%
  • Inflation (CPI):
    • 0.5%
  • FDI Inflow:
    • $254.4 million
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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.

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Background

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.

Rule of LawView Methodology

Property Rights 55.5 Create a Graph using this measurement

Government Integrity 34.3 Create a Graph using this measurement

Judicial Effectiveness 33.0 Create a Graph using this measurement

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.

Government SizeView 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 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.

Regulatory EfficiencyView Methodology

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.

Open MarketsView Methodology

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.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Canada78.50.5
2Chile76.5-1.2
3United States75.1-0.3
4Colombia69.7-1.1
5Uruguay 69.70.9
6Jamaica 69.52.0
7Peru68.91.5
8Panama 66.31.5
9Saint Vincent and the Grenadines65.2-3.6
10Saint Lucia65-5.0
11Costa Rica 65-2.4
12El Salvador 64.1-1.0
13Dominica63.7-3.3
14Mexico63.6-1.6
15Guatemala 631.2
16Dominican Republic62.91.9
17Paraguay 62.40.9
18Trinidad and Tobago61.2-1.7
19The Bahamas61.1-9.8
20Nicaragua 59.20.6
21Honduras 58.81.1
22Belize58.61.2
23Guyana58.53.1
24Barbados54.5-13.8
25Brazil52.9-3.6
26Argentina50.46.6
27Haiti49.6-1.7
28Ecuador49.30.7
29Suriname48-5.8
30Bolivia47.70.3
31Cuba33.94.1
32Venezuela 27-6.7
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