2016 Index of Economic Freedom

The Bahamas

overall score70.9
world rank31
Rule of Law

Property Rights70.0

Freedom From Corruption71.0

Limited Government

Government Spending84.3

Fiscal Freedom97.9

Regulatory Efficiency

Business Freedom70.7

Labor Freedom72.8

Monetary Freedom78.5

Open Markets

Trade Freedom64.0

Investment Freedom40.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 0.4 million
  • GDP (PPP):
    • $9.0 billion
    • 1.3% growth
    • 1.1% 5-year compound annual growth
    • $25,049 per capita
  • Unemployment:
    • 15.4%
  • Inflation (CPI):
    • 1.2%
  • FDI Inflow:
    • $1.6 billion
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The Bahamian economy depends on tourism and offshore banking. The overall regulatory system is conducive to entrepreneurial activity. However, the emergence of a more dynamic private sector is still held back by protectionism and bureaucracy that undermines the investment environment.

Economic Freedom Snapshot

  • 2016 Economic Freedom Score: 70.9 (up 2.2 points)
  • Economic Freedom Status: Mostly Free
  • Global Ranking: 31st
  • Regional Ranking: 2nd in the South and Central America/Caribbean Region
  • Notable Successes: Management of Public Spending and Rule of Law
  • Concerns: Trade Freedom and Regulatory Efficiency
  • Overall Score Change Since 2012: +2.9

The Bahamas has regained some growth momentum but still faces challenges. High unemployment and household debt have held back domestic demand. Non-performing loans in the banking sector account for around 16 percent of total loan volume. A 7.5 percent value-added tax was introduced in 2015.



Prime Minister Perry Christie and his Progressive Liberal Party won a five-year term in 2012. Tourism accounts for more than 60 percent of GDP. International banking, investment management, and financial services are also economically important. The Bahamas began the process to attain membership in the World Trade Organization in 2001, but politicians and the private sector remain at loggerheads about how to replace tariff revenues. Located just 50 miles off the coast of Florida, the Bahamas is a major transshipment point for illegal drugs to the U.S. and Europe and for smuggling illegal migrants into the U.S.

Rule of LawView Methodology

Property Rights 70.0 Create a Graph using this measurement

Freedom From Corruption 71.0 Create a Graph using this measurement

The Bahamas remains a major drug transit country, with increasing shipments of marijuana and cocaine interdicted in 2015. Money laundering and pervasive government corruption are ongoing problems. Critics allege extensive nepotism, cronyism, and favoritism. The largely well-functioning legal system, based on British common law, is independent, but the judicial process tends to be very slow. Property registration is difficult and time-consuming.

Limited GovernmentView Methodology

The Bahamas has one of the world’s lowest tax burdens. The government imposes national insurance, property, and stamp taxes but no income, corporate income, capital gains, value-added, or wealth taxes. Government spending amounts to about 22.8 percent of total domestic output, and tax revenue equals about 14 percent of GDP. Public debt has increased to a level equivalent to about 60 percent of annual economic activity.

Regulatory EfficiencyView Methodology

Starting a business costs about 10 percent of the level of average annual income, and no minimum capital is required. No major reforms have been implemented in recent years. The labor market is relatively flexible, and enforcement of the labor codes is somewhat lax. In 2015, the IMF estimated that annual subsidies of fuels and the state-owned electricity generation company amounted to nearly 1 percent of GDP.

Open MarketsView Methodology

The average tariff rate is a relatively high 13 percent due to the government’s reliance on tariffs as a major source of revenue. The government screens new foreign investment and restricts investment in certain sectors of the economy. The banking sector is diversified and remains stable and well capitalized, although the number of non-performing loans has increased.

Country's Score Over Time

Bar Graph of The Bahamas Economic Freedom Scores Over a Time Period

Country Comparisons

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Regional Ranking

rank country overall change
2The Bahamas70.92.2
4Saint Lucia70-0.2
5Saint Vincent and the Grenadines68.80.8
6Uruguay 68.80.2
8Jamaica 67.5-0.2
10Costa Rica 67.40.2
12El Salvador 65.1-0.6
13Panama 64.80.7
14Trinidad and Tobago62.9-1.2
15Guatemala 61.81.4
16Paraguay 61.50.4
17Dominican Republic610.0
18Nicaragua 58.61.0
19Honduras 57.70.3
28Venezuela 33.7-0.6
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