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- GDP (PPP):
- $4.5 billion
- -0.3% growth
- 0.1% 5-year compound annual growth
- $16,183 per capita
- Inflation (CPI):
- FDI Inflow:
With strong foundations of economic freedom supported by relatively low levels of corruption and an efficient judiciary, Barbados’s economic policies have attracted international companies. Relatively high regulatory efficiency facilitates private-sector growth, and offshore finance and tourism continue to be important sources of economic growth.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 68.3 (up 0.4 point)
- Economic Freedom Status: Moderately Free
- Global Ranking: 45th
- Regional Ranking: 7th in the South and Central America/Caribbean Region
- Notable Successes: Regulatory Efficiency and Rule of Law
- Concerns: Government Spending and Trade Freedom
- Overall Score Change Since 2012: –0.7
Barbados is a stable parliamentary democracy. Prime Minister Freundel Stuart, whose Democratic Labour Party won a five-year term in 2013, has announced that he wants the Caribbean island to become a republic in 2016, the 50th anniversary of its independence from the United Kingdom. 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. Fiscal consolidation measures adopted since 2014 have helped to stabilize the economy and contributed to a slight rebound in growth in 2015. Despite its success in cultivating a booming tourism sector, the government is trying to diversify the economy in order to reduce its external vulnerability.
Corruption is not a major problem in Barbados. There are criminal penalties for official corruption, and the government’s enforcement of anti-corruption measures is generally effective. 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.
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 amounts to 23.9 percent of total domestic income. Expansionary government spending has climbed to over 45 percent of total domestic output. With chronically high budget deficits averaging over 4 percent of GDP, public debt has risen to about the size of the economy.
The regulatory framework generally facilitates entrepreneurial activity. With no minimum capital required, launching a business is relatively streamlined, but obtaining necessary permits remains time-consuming. Hiring and dismissal regulations are not burdensome. U.S. subsidies to rum producers in U.S. Caribbean territories negatively affect an economy already distorted by government energy subsidies and price controls on basic commodities.
Barbados has a relatively high 13.9 percent average tariff rate. Foreign investment in some sectors of the economy is limited; otherwise, foreign and domestic investors are generally treated the same under the law. The banking sector provides a wide range of services for domestic and foreign investors, although securities markets are relatively illiquid.