2021 Index of Economic Freedom

Barbados

OVERALL SCORE65.0
WORLD RANK67
Rule of Law

Property Rights52.7

Judicial Effectiveness49.7

Government Integrity50.2

Government Size

Tax Burden79.3

Government Spending73.1

Fiscal Health79.8

Regulatory Efficiency

Business Freedom69.7

Labor Freedom60.1

Monetary Freedom77.3

Open Markets

Trade Freedom58.4

Investment Freedom70.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 0.3 million
  • GDP (PPP):
    • $5.4 billion
    • -0.1% growth
    • 0.9% 5-year compound annual growth
    • $16,287 per capita
  • Unemployment:
    • 10.3%
  • Inflation (CPI):
    • 4.1%
  • FDI Inflow:
    • $215.4 million

Barbados’s economic freedom score is 65.0, making its economy the 67th freest in the 2021 Index. Its overall score has increased by 3.6 points, primarily because of an improvement in fiscal health. Barbados is ranked 12th among 32 countries in the Americas region, and its overall score is above the regional and world averages.

In 2021, the economic freedom score for Barbados climbed higher in the moderately free category. The main reason for the improvement was better management of debt by the government. Scores for the judicial effectiveness and tax burden indicators also improved. Reduction of the country’s extremely large public debt is a significant step toward the restoration of investor confidence.

IMPACT OF COVID-19: As of December 1, 2020, seven deaths had been attributed to the pandemic in Barbados, and the economy was forecast to contract by 11.6 percent for the year.

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Background

Independent from the United Kingdom since 1966, Barbados is a stable parliamentary constitutional monarchy. Prime Minister Mia Mottley, the country’s first female leader, was elected to a five-year term in 2018, and her center-left Barbados Labor Party controls all 30 parliamentary seats. Against the backdrop of high public debt and unemployment, Mottley faces the challenge of enacting structural fiscal reforms. Barbados is a middle-income country with a diversified economy that, built on tourism and offshore banking, generates one of the Caribbean’s highest per capita incomes. Tourism has rebounded, but serious challenges to medium-term economic growth remain. In 2020, Mottley announced that Barbados will leave the British Commonwealth of Nations and become an independent republic by its 55th anniversary in 2021.

Rule of LawView Methodology

Property Rights 52.7 Create a Graph using this measurement

Judicial Effectiveness 49.7 Create a Graph using this measurement

Government Integrity 50.2 Create a Graph using this measurement

Property registration in Barbados is time-consuming and expensive. Civil law protects physical property and mortgage claims. The court system is based on British common law and is generally unbiased and efficient. Protection of property rights is strong, and the rule of law is respected, but the government has failed to implement key anticorruption measures and has been unable to combat money laundering and terrorist financing.

Government SizeView Methodology

The top individual income tax rate has been cut to 28.5 percent as of January 1, 2020, and the top corporate tax rate is 5.5 percent. The overall tax burden equals 35.0 percent of total domestic income. Government spending has amounted to 29.9 percent of total output (GDP) over the past three years, and budget deficits have averaged 0.4 percent of GDP. Public debt is equivalent to 119.5 percent of GDP.

Regulatory EfficiencyView Methodology

A new law makes enforcement of contracts more reliable. Getting electricity has also become faster. Registration of property, however, has become more time-consuming. An oversized framework of labor laws interferes with labor freedom. The government has introduced a significant agricultural subsidy program to enhance the island’s food security.

Open MarketsView Methodology

Barbados has two preferential trade agreements in force. The trade-weighted average tariff rate is 13.3 percent, and 128 nontariff measures are in effect. There are no limits on foreign investment and ownership, but some sectors, such as telecommunications, utilities, and banking, require a government license. The banking sector provides a wide range of services for investors, but capital markets are not fully developed.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Canada77.9-0.3
2Chile75.2-1.6
3United States74.8-1.8
4Uruguay69.30.2
5Jamaica690.5
6Colombia68.1-1.1
7Peru67.7-0.2
8Saint Lucia67.5-0.7
9Saint Vincent and the Grenadines66.3-0.5
10Panama66.2-1.0
11Mexico65.5-0.5
12Barbados653.6
13The Bahamas64.60.1
14Costa Rica64.2-1.6
15Guatemala640.0
16Paraguay62.6-0.4
17Dominican Republic62.11.2
18El Salvador61-0.6
19Honduras59.8-1.3
20Trinidad and Tobago590.7
21Belize57.50.1
22Guyana57.41.2
23Nicaragua56.3-0.9
24Brazil53.4-0.3
25Dominica53-7.8
26Argentina52.7-0.4
27Ecuador52.41.1
28Haiti50.8-1.5
29Suriname46.4-3.1
30Bolivia42.7-0.1
31Cuba28.11.2
32Venezuela24.7-0.5
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