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- GDP (PPP):
- $7.0 billion
- -0.7% growth
- -0.8% 5-year compound annual growth
- $25,181 per capita
- Inflation (CPI):
- FDI Inflow:
Barbados’s economic freedom score is 67.9, making its economy the 46th freest in the 2015 Index. Its score is 0.4 point worse than last year due to declines in half of the 10 economic freedoms including the control of public spending, labor freedom, and freedom from corruption. Barbados is ranked 7th out of 29 countries in the South and Central America/Caribbean region, and its overall score remains well above the global and regional averages.
Barbados is one of the Caribbean region’s most prosperous economies, and offshore finance and tourism have been important sources of economic growth. With relatively strong foundations of economic freedom supported by a high degree of transparency and an efficient judiciary, the economy has focused on attracting international companies and long-term investment.
Over the past five years, Barbados’s economic freedom has declined by about 0.5 point. Improvements in such areas as investment freedom, trade freedom, and fiscal freedom have been offset by notable deteriorations in business freedom, labor freedom, and the management of government spending. Large fiscal deficits have driven an increase in government debt, which is now almost equal to the size of the economy.
Barbados is a politically stable parliamentary democracy. Prime Minister Freundel Stuart and his Democratic Labour Party won a five-year term in office in 2013. 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 highest per capita incomes in the Caribbean. However, tourism revenues have declined, and financial services and construction have never fully recovered from the Great Recession that began in 2008. The government is trying to diversify away from tourism, which has been the main source of external vulnerability. In 2014, in an effort to reduce its large fiscal deficit, the government imposed an asset tax on banks and laid off 3,000 public-sector workers.
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 individual 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 27.8 percent of domestic income, and government spending is equivalent to around 43.9 percent of the total domestic economy. At 92 percent of GDP, public debt is high for a small island nation.
There is no minimum capital requirement, but starting a business requires eight procedures and takes more than two weeks. On average, obtaining permits for construction takes over 400 days. Despite relatively flexible employment regulations, a well-functioning labor market has not fully developed. The government maintains price controls on basic food commodities but removed its fuel subsidy for public service vehicles in 2014.
Barbados has a relatively high 13.1 percent average tariff due to its reliance on tariff revenue to finance the government. Foreign and domestic investors are generally treated equally, but investment in some sectors is regulated. The banking sector has grown, offering a wider range of services for domestic and foreign investors. The securities market lacks depth and remains relatively illiquid.