Barbados - Economy

Overview: Barbados has an exceptionally high ‘quality of life’ rating for a developing country. The economy, formerly a sugar monoculture, was developed over three decades to achieve a balance of growth and social development, and diversified into three main sectors: services, light industry and sugar. An offshore financial services sector, launched in 1985, has become the country’s second biggest source of foreign exchange after tourism.

Despite its economic success, Barbados experienced little growth in the 1980s and a recession in the early 1990s, when sugar and tourism earnings slumped. It had to call on the IMF for economic adjustment support and the government introduced economic austerity measures. By 1993 the economy was recovering and in 1994 it grew by 4% and continued to grow well throughout the 1990s and during 2000, driven by tourism and construction. Action against drug trafficking since the 1990s has made security and defence a significant item of expenditure.

As a small and open economy Barbados lacks scope for further diversification and remains vulnerable to economic downturn in its trade partners. After 2000 the economy went into recession due to the downturn in the USA and Europe and resulting falls in tourist numbers. It picked up in 2003 and GDP grew at an average 4% p.a. in 2004–07, remaining resilient in 2007 despite the deteriorating global financial environment.

Trade: Main exports are chemicals, sugar, manufactured goods including electrical components and rum. Main imports are consumer goods, food/beverages, machinery, construction materials and fuels. Other CARICOM countries, the USA and the UK are the main trading partners for exports. The USA, Trinidad and Tobago, other CARICOM countries and the UK are the main sources of imports.

From 2007, when the Cotonou Agreement between the European Union and the ACP grouping of developing countries came to an end, negotiations proceeded on a series of regional Economic Partnership Agreements, to replace the preferential trade agreements of the Cotonou Agreement with WTO-compliant free-trade areas.