Barbados’ economic growth slowed in the first half of the year as global uncertainty intensified, with the Central Bank of Barbados warning on Thursday that rising inflation, higher interest rates and geopolitical conflicts are weighing on the outlook despite continued resilience at home.
Anchoring the country’s latest economic performance and its outlook in worsening global uncertainty, the Central Bank reported a 0.6 per cent dip in real growth from January to June when compared year-on-year with 2025.
In the latest quarterly review, Governor Dr Kevin Greenidge told journalists that real gross domestic product (GDP) grew by 1.4 per cent, down from two per cent for the same period in 2025.
Growth at the end of the first quarter of this year was 1.7 per cent, and at the end of March the bank projected economic expansion of between two per cent and three per cent for the rest of 2026 and into the medium term.
But since then, the global environment has become “steadily more uncertain”, and “the conflict in the Middle East continues to disrupt the oil market and to tighten supply chains”, he said.
The conflict in Ukraine has also had a braking effect on growth in the Barbados economy, he added.
Dr Greenidge said: “The consequence is persistent inflation which has eroded real incomes across the globe, and also impacted spending; including the spending patterns of those major trading partners, with whom we do business. That pressure has also been passed onto the financial markets. We have seen inflation expectations have risen over the past six months. We have seen global interest rates also rise with them, and that included the US market.
“So, borrowing costs have increased, and government finances everywhere have come under greater strain. Credible analysis suggests that, going into the future, interest rates may continue to rise even higher, as we move into the medium term; and that will put constraining pressures on public and private investment; and, of course, we here in Barbados are not insulated from that.”
But Dr Greenidge sought to assure the country that despite these shocks, Barbados continues to hold its own:
“Barbados has absorbed those shocks, and we continue to grow, and our reserves remain at very comfortable levels. And that outcome reflects buffers built over the recent years, and the decision that was taken to shield households and businesses from the full force of the shocks, particularly when oil prices had escalated; and they still remain high.”
The governor contended that the task ahead is to remain stable and improve the economic situation:
“We must manage expenditure efficiently, continue to strengthen our tax administration, and find fiscal savings where feasible, so that we rebuild the ‘rainy day’ funds that give us the capacity to respond, if conditions deteriorate further. We must deliver on the investment that the country needs in roads and connectivity, in health and in education, while at the same time, keeping debt firmly on a downward trajectory.”
He argued that a declining debt-to-GDP ratio remains the right measure of sustainability, and that the intention is to keep moving it downward.
In the Central Bank’s overview of the economy, the domestic sector led growth for the first half of this year, as the non-traded sector expanded by 1.5 per cent.
Businesses and other services drove that expansion, with wholesale and retail trade also contributing and construction recording modest growth.
The traded sector also expanded by 0.4 per cent.
Tourism value added, which accounts for about half of traded output, remained close to its level a year earlier, and long-stay arrivals edged higher, but shorter average stays reduced visitor nights.
Agriculture added to the growth, while manufacturing output remained broadly unchanged.
Labour market indicators remained broadly favourable, while inflation rose from a low base but remained contained, he reported.
Unemployment stood at 6.1 per cent up to the end of March, approximately 0.2 percentage points below its level a year earlier, and unemployment claims fell by 3.7 per cent during January to June.
More up-to-date jobless figures were not made available.
But the labour force also shrank by 2 700 people as more people retired, so the lower unemployment rate reflected both a reduction in the number of unemployed people and lower labour force participation.
The 12-month moving average inflation rate reached 1.4 per cent, while point-to-point inflation rose to two per cent in May, as higher prices for food, education, housing and utilities, and transport pushed the rate up. Government policy measures continued to cushion the domestic pass-through of external cost pressures.
Barbados maintained strong external buffers, reinforcing its resilience to external shocks. International reserves increased by $91.8m from the end of December 2025 to $3.bn, equivalent to 25.9 weeks of import cover and well above the internationally accepted adequacy benchmark.
The current account deficit narrowed to $189.4m, as stronger net current transfers and a narrower income deficit more than offset a wider merchandise trade deficit and a smaller services surplus.
Dr Greenidge said the government comfortably exceeded its first primary balance floor under the BERT 2026 programme.
The government also preserved substantial surpluses while increasing spending on goods and services, public institutions, and capital projects. Although both surpluses narrowed year-on-year, the primary surplus remained well above the programme floor.
Sustained primary surpluses and continued economic growth kept public debt falling.
Gross public debt stood at $15.1bn at the end of June, $250.8m below the ceiling set under the BERT 2026 programme. The debt-to-GDP ratio declined by 1.1 percentage points to 93.7 per cent, from 94.8 per cent the year before.
(EJ)
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