2018 Index of Economic Freedom

Barbados

overall score57.0
world rank117
Rule of Law

Property Rights51.4

Government Integrity53.8

Judicial Effectiveness54.4

Government Size

Government Spending39.3

Tax Burden74.0

Fiscal Health0.0

Regulatory Efficiency

Business Freedom70.5

Labor Freedom63.2

Monetary Freedom85.0

Open Markets

Trade Freedom62.2

Investment Freedom70.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 0.3 million
  • GDP (PPP):
    • $4.8 billion
    • 0.5% growth
    • 0.6% 5-year compound annual growth
    • $17,100 per capita
  • Unemployment:
    • 11.4%
  • Inflation (CPI):
    • 0.3%
  • FDI Inflow:
    • $228.3 million
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Barbados’s economic freedom score is 57.0, making its economy the 117th freest in the 2018 Index. Its overall score has increased by 2.5 points, with significant improvements in judicial effectiveness and government integrity outweighing declines in scores for the investment freedom and labor freedom indicators. Barbados is ranked 24th among 32 countries in the Americas region, and its overall score is below the regional and world averages.

Increases in arrivals and spending by tourists have helped economic growth in the past year in Barbados. The government has prioritized fiscal consolidation, but government debt remains a problem. 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

Independent from the U.K. since 1966, Barbados is a stable parliamentary constitutional monarchy. Prime Minister Freundel Stuart of the center-left Democratic Labour Party, in office since 2010, will face a tough reelection fight in 2018. His tax increases and fiscal austerity program have resulted in some streamlining of the public sector, reform of university tuition financing, and restructuring of state-owned firms. Nevertheless, public-sector debt remains very high. Barbados has transformed itself from a low-income agricultural economy into a more diversified, middle-income economy built on tourism and offshore banking that generates one of the Caribbean’s highest per capita incomes. Tourism receipts have improved, but serious challenges to medium-term economic growth remain.

Rule of LawView Methodology

Property Rights 51.4 Create a Graph using this measurement

Government Integrity 53.8 Create a Graph using this measurement

Judicial Effectiveness 54.4 Create a Graph using this measurement

The protection of property rights is strong, and the rule of law is respected. Property registration in Barbados, however, is very time-consuming. The politically independent court system is based on British common law and is generally unbiased and efficient. The government’s effectiveness in prosecuting official corruption is the best in the region.

Government SizeView Methodology

The top income tax rate is 35 percent, and the top corporate tax rate is 25 percent. Other taxes include value-added and property taxes. The overall tax burden equals 27.3 percent of total domestic income. Over the past three years, government spending has amounted to 45.0 percent of total output (GDP), and budget deficits have averaged 7.2 percent of GDP. Public debt is equivalent to 107.9 percent of GDP.

Regulatory EfficiencyView Methodology

The process for starting a business has been made easier, and the overall regulatory environment is relatively straightforward and transparent. Wages in Barbados are among the highest in the Caribbean. Minimum wages are set for only a few categories of workers. Subsidies to inefficient state-owned enterprises consume close to 8 percent of the budget.

Open MarketsView Methodology

Trade is significant for Barbados’s economy; the combined value of exports and imports equals 83 percent of GDP. The average applied tariff rate is 13.9 percent. Nontariff barriers impede some trade. Government openness to foreign investment is above average. The banking sector provides a wide range of services for domestic and foreign investors, but securities markets are relatively illiquid.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Canada77.7-0.8
2United States75.70.6
3Chile75.2-1.3
4Uruguay 69.2-0.5
5Jamaica 69.1-0.4
6Colombia68.9-0.8
7Peru68.7-0.2
8Saint Vincent and the Grenadines67.72.5
9Saint Lucia67.62.6
10Panama 670.7
11Costa Rica 65.60.6
12Mexico64.81.2
13Dominica64.50.8
14Guatemala 63.40.4
15The Bahamas63.32.2
16El Salvador 63.2-0.9
17Paraguay 62.1-0.3
18Dominican Republic61.6-1.3
19Honduras 60.61.8
20Nicaragua 58.9-0.3
21Guyana58.70.2
22Trinidad and Tobago57.7-3.5
23Belize57.1-1.5
24Barbados572.5
25Haiti55.86.2
26Argentina52.31.9
27Brazil51.4-1.5
28Ecuador48.5-0.8
29Suriname48.10.1
30Bolivia44.1-3.6
31Cuba31.9-2.0
32Venezuela 25.2-1.8
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