families (27.9 percent) had at least one member who had lost their job between BARBADOS Key conditions and March and June 2020; the less well-off were hit particularly hard, as 39 per- challenges cent of households classified as poor in the baseline survey of 2016/17 re- Table 1 2021 Barbados is a high-income service econo- ported a family member becoming un- Population, million 0.3 my, built on tourism and financial sector employed in the period. Notably, the GDP, current US$ billion 4.8 services. However, the country’s economic share of middle-income households un- GDP per capita, current US$ 16665.8 achievements remain vulnerable due to its able to meet their financial commitments a 99.7 School enrollment, primary (% gross) small size, its dependence on tourism at (60 percent) was greater than the share a 79.2 17 percent of GDP, and considerable ex- of low-income households (43 percent) Life expectancy at birth, years Total GHG Emissions (mtCO2e) 3.5 posure to climate change risks. Besides the as of April 2020. Source: WDI, Macro Poverty Outlook, and official data. COVID-19 pandemic, natural disasters Poverty levels were likely still elevated a/ Most recent WDI value (2019). such as Hurricane Elsa and the eruption in 2021. There are no official poverty es- of the volcano La Soufriere disrupted eco- timates since 2017 when 17.2 percent of nomic activity in 2021. The additional vul- households and 25.7 percent of con- Barbados’s economy rebounded in 2021 nerability stems from the high level of sumers were under the basic needs line. public debt, which is currently over 135 Nevertheless, GDP was lower in 2021 in line with international travel and eas- percent of GDP, an increase compared to than in 2017, with greater impacts to the ing containment measures but was nega- 124.8 percent in 2019 when a successful bottom of the income distribution. Non- tively affected by natural disasters such debt restructuring was completed. monetary poverty dimensions, such as as the eruption of the volcano La The BERT plan, which included the debt food security, indicate persistent depriva- Soufriere and Hurricane Elsa. Its current restructuring and is supported through a tion during the pandemic. Hunger rates four-year IMF Extended Fund Facility, is in Barbados rose from 5.8 percent in Jan- account deficit is estimated at 11.4 per- aimed at restoring macroeconomic stabili- uary 2020 to 6.9 percent in October 2020. cent of GDP. Unemployment decreased to ty while safeguarding the financial and so- Households categorized as extremely 12.4 percent in 2021. The pandemic cial sectors. The government has made sig- poor in 2016/17 still experience the great- curbed the reform efforts made in the con- nificant fiscal efforts to gradually reduce est shares of food insecurity, but the in- the debt burden; and under the macroeco- crease was larger among those who were text of the Barbados Economic Recovery nomic framework of the IMF program, identified as vulnerable to poverty. and Transformation (BERT) plan to sus- debt is expected to reach 60 percent of tain primary surpluses and reduce exter- GDP by FY 2035/36. nal vulnerabilities. The Barbados COVID-19 Survey under- taken by the Inter-American Develop- Recent developments ment Bank revealed severe consequences to welfare from the pandemic; average GDP growth for 2021 is estimated at 1.4 household total income and spending percent, a mild recovery after the 13.7 per- dropped by 20 percent and 29 percent cent contraction in 2020. Economic activity respectively. More than one quarter of rebounded after the second quarter of 2021 FIGURE 1 Barbados / Real GDP growth and contributions to FIGURE 2 Barbados / Fiscal balances and public debt real GDP growth Percent, percentage points Percent of GDP Percent of GDP 15 160 8 124.9 146.7 135.8 10 140 6 121.1 113.9 5 120 4 107.8 0 100 2 -5 80 0 -10 60 -2 -15 40 -4 -20 20 -6 2019 2020 2021e 2022f 2023f 2024f 0 -8 Agriculture Industry 2019 2020 e 2021 f 2022 f 2023 f 2024 f Services Net taxes on production Real GDP Growth Debt (lhs) Fiscal balance Primary balance Sources: Government of Barbados; IMF and World Bank staff estimates. Sources: Government of Barbados; IMF and World Bank staff estimates. MPO 1 Apr 22 as lockdown measures eased, although account deficit is estimated to have overall fiscal deficit is projected to remain GDP remained well below pre-pandemic widened to 11.4 percent of GDP, pushed at 3.4 percent of GDP. Fiscal accounts levels. Moderate growth was driven main- by expanding imports and reduced re- are expected to improve in FY 2023/24, ly by private sector consumption. Tourism ceipts. Increasing fuel prices explain half achieving a robust 3.6 percent of GDP exhibited a lackluster performance during the difference in the value of imports. primary surplus and an overall deficit 2021, with arrivals at only 20 percent of Gross international reserves stood at of 1.0 percent of GDP. The authorities 2019 levels. Tourism flows to the country US$3.1 billion, equivalent to an import are expected to resume fiscal consolida- were affected by travel restrictions in the cover of 40 weeks by end-December 2021, tion efforts after the pandemic that will main tourism markets of the US, UK, and these reserves increased during 2021 include state-owned enterprise (SOE) re- Canada which make up 75-80 percent of thanks to borrowing from IFIs and the al- forms and a reform of the civil service arrivals. Total arrivals stood at 143,500 in location of new SDR by the IMF. pension system. The fiscal balance is ex- 2021 compared to 714,650 in 2019. Two After recording a 0.8 percent of GDP pri- pected to turn positive in FY 2024/25. waves of COVID-19 cases hit Barbados in mary deficit and a 4.8 percent of GDP fiscal The inflation rate is projected to reach 5.9 2021, at end-August and end-December. deficit in FY 2020/21, the government is ex- percent in 2022 and then average around By February 2022, 50 percent of the popu- pecting a 1 percent primary deficit and 4.9 2.5 percent in the medium-term. The in- lation was fully vaccinated. percent overall deficit in FY 2021/22. Con- crease in energy and oil prices may pose The lower demand for agricultural prod- tinuing contingent health and disaster re- significant challenges for the external ac- ucts from subdued tourism combined with lief related expenditures, combined with counts, although this will be compensated the impact of the eruption of La Soufriere subdued revenues from tourism explain for by a recovery in tourism receipts. The volcano and the global supply chain dis- these results. current account deficit for 2022 is projected ruptions of key agricultural inputs result- to reach to 12.1 percent of GDP and then ed in a 4 percent contraction of agricultural narrow to 8.8 percent of GDP in 2023. production in 2021. Meanwhile, the man- Robust growth in 2022 will likely be ac- ufacturing sector expanded by over 4 per- Outlook companied by an improvement in the liv- cent driven by production in the food and ing standards, although this is subject to beverages sector. GDP growth is expected to reach 11.2 per- significant uncertainty related to the possi- Employment and earnings were negative- cent in 2022 when the tourism sector is ex- bility of new travel restrictions worldwide, ly affected by the pandemic. The unem- pected to largely recover, and 4.9 percent in and the risk of natural disasters. Higher ployment rate stood at 12.4 percent in 2023. However, the outlook is still uncer- oil prices and imported inflation due to the third quarter of 2021, compared to tain, and it will depend to a great extent on global geopolitical risks may trigger higher 17.6 in 2020. However, employment is progress with respect to vaccination in Bar- consumer prices with implications for the still below its 2019 level and gender dis- bados, the number of COVID-19 cases in the poorest. Returning to pre-pandemic levels parities persist. country, and international travel restric- of employment and income will take The 12-month inflation stood at 5 percent tions. Lagging construction activity and re- longer and will heavily depend on the re- in December 2021, while average inflation newed fiscal consolidation efforts are ex- covery of the tourism sector. Additional during the year was 3 percent, with the pected to moderate growth prospects. The support for the most vulnerable will be highest increases registered in transporta- primary balance is expected to reach 1 per- necessary to attain the welfare levels ob- tion, and food and beverages. The current cent of GDP surplus in FY 2022/23 while the served over last decade. TABLE 2 Barbados / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f 2023f 2024f Real GDP growth, at constant market prices -1.3 -13.7 1.4 11.2 4.9 3.0 Real GDP growth, at constant factor prices -1.2 -13.7 1.3 11.3 5.0 3.1 Agriculture -4.5 -4.8 -4.0 1.1 0.5 0.5 Industry -1.9 -3.9 4.0 4.2 3.5 3.0 Services -1.0 -15.7 0.9 13.0 5.4 3.2 Inflation (Consumer Price Index) 4.1 2.9 3.0 5.9 2.7 2.5 Current Account Balance (% of GDP) -3.1 -7.0 -11.4 -12.1 -8.8 -6.8 Fiscal Balance (% of GDP) 3.8 -4.8 -4.9 -3.4 -1.0 0.4 Debt (% of GDP) 124.9 146.7 135.8 121.1 113.9 107.8 Primary Balance (% of GDP) 6.2 -0.8 -1.0 1.0 3.6 5.1 GHG emissions growth (mtCO2e) 0.0 -6.0 -0.9 -10.0 -10.4 -11.1 Energy related GHG emissions (% of total) 31.0 27.3 27.4 28.1 28.3 27.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. MPO 2 Apr 22