The Central Bank of Barbados (CBB) Wednesday said despite global economic uncertainties and the negative consequences of Hurricane Beryl, Barbados has maintained a steady path of economic growth and resilience.
It said that the real gross domestic product (GDP) advanced by 3.9 per cent during the first nine months of 2024, driven by key sectors such as tourism, business services, and construction.
CBB Governor, Dr. Kevin Greenidge delivering the bank’s review of the local economy for the first nine months of this year, told a news conference that inflation moderated, unemployment fell, and the country’s external position remained robust, marked by the highest September international reserves level, equivalent to 31.2 weeks of imports of goods and services.
The CBB is predicting that the Barbados’ economy is set to maintain its growth momentum through year-end, with real GDP expanding by approximately 3.8 per cent.
“This expansion will be driven by ongoing private and public sector investments, particularly in tourism and utility infrastructure. Additionally, the digitisation of public and private operations is anticipated to enhance efficiencies, reduce costs, and boost productivity across industries. Workforce development initiatives, focused on technical skills enhancement, are also expected to strengthen economic resilience,” it added.
Greenidge said strategic investments and fiscal discipline have supported economic stability.
The bank reported that higher revenues from direct taxes, particularly corporation and property taxes, along with increased Value-added tax (VAT) receipts, have enabled the Government to boost public transfers and investments in critical sectors such as education and in digitisation efforts aimed at improving public service delivery.
“Outlays on innovation, such as the establishment of a new digital innovation and health centre, have also been prioritised to strengthen Barbados’ future growth prospects,” the CBB said, adding that government’s fiscal operations resulted in a surplus and reduced the debt-to-GDP ratio.
It said a half-year (April to September) primary surplus of BDS$581.9 million (One Barbados dollar=US$0.50 cents) or four per cent of GDP, contributed to a steady decline in the debt-to-GDP ratio, which now stands at 105.6 per cent.
“This achievement reflects Barbados’ resilience in managing external shocks while continuing to reduce its reliance on new debt. By controlling expenditures and directing resources towards long-term growth initiatives, Barbados has reinforced its ability to navigate global challenges and secure sustainable development,” Greenidge said.
He told reporters that the Barbados economic outlook is positive, despite growing geopolitical uncertainty.
“Looking ahead, Barbados’ economy is expected to continue its positive trajectory, with growth driven by sustained activity in tourism, construction, and business services. While external risks such as global commodity price fluctuations and geopolitical uncertainties remain, the country’s focus on strategic investments and fiscal prudence is anticipated to support further stability and resilience.”
But, the CBB warned that while economic growth prospects remain positive, several downside risks could temper these projections.
It noted that the October 2024 World Economic Outlook projects steady global growth at 3.2 per cent, driven by advanced economies such as the United States and Canada and emerging markets like China and India.
“However, slower-than-expected global growth may reduce export demand and tourism from key source markets. High airline ticket prices may also dampen tourism demand, limiting the sector’s growth. Additionally, climate-related risks remain significant, as increased hurricane, flood, and storm activity could disrupt travel, damage infrastructure, and weaken the agricultural sector.”
According to the CDB, economic activity and robust performance across several key sectors drove economic growth in the first nine months of the year.
Tourism, construction, and business services led the expansion, pushing real GDP up by 3.9 per cent. Activity in the non-traded sector grew across the board, for an average of 3.9 per cent, while challenges in agriculture constrained growth in the traded sector to 3.8 per cent. But, the bank said despite these hurdles, the economy showed resilience against both domestic and external pressures.
It said that tourism remained a key driver of growth, with significant increases in long-stay arrivals. Long-stay visitors increased by 12.9 per cent over the first nine months.
Although there was a slight decline in flights from the United Kingdom and Europe during the third quarter, strong performance earlier in the year, along with an increase in cruise activity, offset the slowdown.
The CBB said that arrivals from the US market surged by 32.5 per cent, exceeding pre-pandemic levels (2017-2019 average) by 10.4 per cent, while Canadian tourists registered a 16.5 per cent increase. The CARICOM market also recorded significant gains, further contributing to the sector’s recovery.
The bank said higher tourism demand boosted hotel occupancy rates and revenues. The rise in long-stay arrivals boosted the accommodation sector, where average room demand increased by 8.2 per cent, outpacing the five per cent growth in available rooms.
Cruise ship activity also played a vital role in the sector’s recovery. For the first time since 2021, summer cruise arrivals returned to the island, with in-transit cruise visitors growing by 27.7 per cent, reaching 377,340 by the end of September. The sector recorded 286 cruise calls during this period, an increase of 41 compared to the same timeframe in 2023, the bank said.
Greenidge said that price inflation in Barbados eased in 2024, though adverse weather conditions pushed up some food prices.
He said the point-to-point inflation rate fell to 0.7 per cent in August, down from 2.9 per cent a year earlier. The 12-month moving average inflation rate also moderated, dropping to 2.4 per cent from 3.4 per cent.
Lower global energy prices helped drive this decline, along with reduced costs for transportation, communication, and recreation. However, adverse weather conditions led to price increases for dairy products, fruits, and vegetables, pushing up domestic food prices. The CBB said despite the easing of global food prices, local agricultural shortages kept upward pressure on these categories. Domestic energy costs, by contrast, moderated in line with declining international fuel prices, providing some relief to consumers.
Barbados’ external sector improved in the first nine months of the year, as the current account deficit contracted.
Greenidge said the deficit narrowed to five per cent of GDP, down from 9.5 per cent in the same period in 2023.
“Higher tourism revenues and increased current transfer credits contributed to this improvement, though these gains were offset by a marginally wider merchandise trade deficit. The country’s gross international reserves remained robust, providing ample import cover.”
The Central Bank Governor said that the higher primary balance reduced government’s gross financing requirement.
Government’s gross financing requirement for the first half of the financial year 2024/25 amounted to BDS$187.3 million, representing 1.3 per cent of GDP, a significant decline from BDS$395.6 million or 2.9 per cent of GDP during the same period in the financial year 2023/24.
A higher primary surplus of BDS$581.9 million, or four per cent of GDP) in 2024, up from BDS$294.5 million – 2.2 per cent of GDP – in the prior year, was the main factor behind this reduction.
Greenidge said despite this, the total financing requirement for the period increased to BDS$769.2 million or 5.3 per cent of GDP, up from BDS$690.1 million or five per cent of GDP in 2023. ‘
He said this rise reflected higher debt service obligations, which reached BDS$702 million in 2024, an increase from BDS674.4 million in the corresponding period of 2023.
The government’s interest payments grew while amortisation declined during the first half of the fiscal year.
Foreign interest payments increased by BDS$25 million, a result of external borrowings from the previous fiscal year. Additionally, domestic interest expenses expanded by BDS$18.4 million, from the sales of the Barbados Optional Saving Scheme Plus (BOSS+) securities and treasury bills, as well as the step-up interest rate feature of the restructured domestic bonds.
Domestic amortisation dropped by BDS$24.4 million compared to a year ago, when domestic payments were higher due to the repayment of Series H bonds to the Central Bank. The commencement of principal payments for a policy-based loan, expanded foreign amortisation by BDS$8.7 million.
The CBB said that conditions in the financial sector remained stable, actively supporting economic activity.
It said credit balances saw modest expansion, accompanied by continued improvements in credit quality. Total deposits grew, driven by activity in the global business sector and increased tourism output, which contributed to higher system liquidity.
“Profitability among banks and finance companies declined due to smaller reductions in loan loss provisions and lower net interest income, respectively. Despite this, capital adequacy ratios (CARs) for both banks and finance companies remained well above the regulatory minimum, underscoring the sector’s resilience,” the CBB noted.
The CBB said that the financial sector is forecasted to remain stable through 2024, with robust capital adequacy levels.
“Credit is anticipated to grow, underpinned by increased activity in the real estate market and business investment. Loan delinquency rates are expected to decline further amid lower commodity prices and sustained economic activity. While liquidity in the financial system should remain high, an expected increase in imports could moderate deposit growth in the last quarter,” the CBB added.
BRIDGETOWN, Barbados, Oct 30, CMC –
CMC/ag/ir/2024
