As officials from the Central Bank of Barbados and Ministry of Finance join their counterparts in Washington DC this week for the International Monetary Fund (IMF) and World Bank annual meetings, the positive news from the IMF is that the global economy is performing “better than feared”.
However, IMF managing director Kristalina Georgieva’s message to Barbados, the Caribbean and the rest of the world is “before anyone heaves a big sigh of relief, please hear this: global resilience has not yet been fully tested and there are worrying signs the test may come”.
The Barbados Fiscal Framework 2026/2027 to 2028/2029 published by the Ministry of Finance projects that the economy will grow by 2.7 per cent and three per cent in the medium term, in the same range as the Central Bank’s outlook.
The Central Bank’s third quarter review and forecast is scheduled to be delivered by Governor Dr Kevin Greenidge on October 29.
“Barbados acknowledges several downside risks to the economic outlook, primarily stemming from the potential global economic slowdown, ongoing trade tensions, vulnerability to external shocks as fluctuations in global commodity prices, sudden changes in tourism demand, and disruptions in international financial markets such as rising international interest rates,” the Fiscal Framework stated.
“Barbados remains vulnerable to environmental risks like extreme weather events including hurricanes, coastal erosion, and rising sea levels.
“Despite these challenges, the economy has shown strong resilience. The outlook for 2025 and the medium term remains cautiously optimistic, supported by strong domestic fundamentals aimed at promoting sustainable growth, enhancing economic stability, and building long term resilience,” it added.
The IMF currently projects that the Barbados economy will grow by three per cent this year, with consumer prices to increase at a rate of two per cent. That forecast, and the one for the rest of the Caribbean, will be updated tomorrow when the institution’s latest World Economic Outlook (WEO) is launched.
Georgieva gave a taste of what was in store in the WEO last Wednesday at the Milken Institute in DC during her traditional curtain raiser speech ahead of the October 13 to 17 annual meetings.
Global growth is forecast at roughly three per cent over the medium term – down from 3.7 per cent pre-pandemic.
Speaking on the theme Opportunity In A Time Of Change, she said: “As our World Economic Outlook will explain, . . . we see global growth slowing only slightly this year and next. All signs point to a world economy that has generally withstood acute strains from multiple shocks.
The managing director, who started her second term in the post a year ago, attributed this “improved policy sector adaptability, outcomes than and supportive long as they hold”.
On the first many parts of have delivered policy, deeper local new fiscal rules, – swift, decisive, fiscal action to and the lasting “Emerging market have significantly frameworks and put out a report the gains. These better when shocks global financial difference.”
Georgieva said sector was adapting them the fact that frontloading import tariff hikes and chains”.
“Corporate balance strong after years are quick after shock, artificial mainstream, and challenge and she said.
The jury is still United States in retaliation, as of now “the as initially announced”.
She elaborated, tariff cent in April to much higher than this resilience mainly to policy fundamentals, private adaptability, less severe tariff than initially feared – for now, supportive financial conditions – for as hold”. first issue, she noted that “in the world, sustained efforts delivered more credible monetary local currency bond markets, rules, and – during the pandemic decisive, and globally coordinated to limit the immediate pain lasting scars”. market economies, especially, significantly upgraded their policy and institutions. We just report on progress, quantifying These economies now perform shocks strike than before the financial crisis. Good policy makes a said secondly that the private adapting in several ways, among that “companies have been import orders in advance of and reorganising their supply balance sheets are generally years of robust profits, reflexes after the dry runs of shock after artificial intelligence is becoming and change is faced as a embraced as an opportunity,” still out on the impact of (US) tariffs and those issued the IMF boss indicated, but shock has not been as large announced”. elaborated, stating: “The US tradeweighted tariff rate has fallen from 23 per to 17.5 per cent now – still than before. The US effective rate is now far above the rest of the world’s, which has held relatively steady this year, with very few cases of retaliation.
“In short, the world has avoided a tit-for-tat slide into trade war – so far. But openness has nonetheless taken a big hit.
“And the story is not over – US tariff rates keep moving. Trade deals with the United Kingdom, the European Union, Japan, and soon Korea have nudged some rates down while disputes with Brazil and India have pushed others up. Other countries’ rates are also likely to move.”
On the fourth reason why the world economy was performing better than projected, Georgieva reported that “fired up by optimism about the productivityenhancing potential of artificial intelligence, global equity prices are surging”.
“This, plus tight risk spreads, leaves funding markets generally wide open – and the dollar’s slide earlier this year gives precious relief to non-US borrowers with dollar-denominated debt,” she said.
That was the good news, as words of caution followed from the IMF managing director.
One warning sign for global economic prospects she flagged was “the surging global demand for gold”.
“Spurred by valuation effects and net purchases – partly reflecting geopolitical factors – holdings of monetary gold now exceed one-fifth of the world’s official reserves,” she stated.
Another factor is further fallout from tariffs.
“On tariffs, the full effect is still to unfold. In the US, margin compression could give way to more price passthrough, raising inflation with implications for monetary policy and growth. Elsewhere, a flood of goods previously destined for the US market could trigger a second round of tariff
hikes,” said Georgieva.
“Yes, world trade is rippling but still flowing – like water, it’s not easy to plug and stop. For now, most of the world’s trade still follows the rules. We at the IMF urge the world’s policymakers: please keep it this way; preserve trade as an engine of growth.
“As for easy financial conditions – which are masking but not arresting some softening trends, including in job creation – history tells us this sentiment can turn abruptly.”
She said that in this multi-polar world of rapid change, “it is paramount that policymakers do much more to capture and deliver opportunity so they can meet the aspirations of their citizens, especially young people”.
The IMF is proposing the following three medium-term policy goals:
• To durably lift growth, so the economy can create more jobs, more public revenue, and better public and private debt sustainability.
• To repair governments’ finances, so they can buffer new shocks and attend to pressing needs without driving up private sector borrowing rates; and
• To address excessive imbalances, both domestic and external, so they do not emerge as a spoiler.
She said: “Global growth patterns have been changing over the years, notably with China decelerating steadily while India develops into a key growth engine.
“Durably lifting growth requires higher private sector productivity. And for this, governments must provide and protect the basic building blocks of free markets, including property rights, rule of law, good data, effective bankruptcy codes, strong financial sector oversight, and independent yet accountable institutions.”
Her view was that “in too many economies, private sector productivity is tangled up in red tape and startups can neither start nor grow. Competition is key, and regulation must not tolerate or create unfair advantage”.
“So today I call on all our member countries to embrace a regulatory housecleaning to release entrepreneurial energy, supported by strong institutions and governance. This is not a time for selfinflicted injuries: it is a time to get the house in order,” she urged.
Beyond insufficient global growth and productivity, Georgieva was concerned about the “sobering reality that global public debt is projected to exceed 100 per cent of GDP by 2029, led by advanced and emerging market economies”.
“Rising debt inflates interest payments, exerts upward pressure on borrowing costs, constrains other spending, and reduces governments’ ability to cushion shocks,” she cautioned.
“One casualty is advanced economies’ development assistance to the world’s neediest countries, which continues its regrettable decline. For the low-income countries on the receiving end, this means more self-help – including setting a minimum tax-to-GDP target of 15 per cent.”
She said fiscal consolidation was necessary “in countries rich and poor alike” and that while this action was difficult, “if planned, communicated, and implemented well, significant deficit reduction can be delivered – especially if helped by higher medium-term growth”. (SC)
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