Barbados’ economy is showing some “resilient economic growth”, but the country’s high dependence on the global economy is a significant risk.
That is the assessment of Vangie Bhagoo-Ramrattan, head of the economic research unit at First Citizens.
The Trinidadian economist said the major risks to Barbados’ economic prospects, and those of its Caribbean neighbours, included United States policies following the return of US President Donald Trump’s to office, political and geopolitical risks, Chinese economic policies, and global interest rates and inflation.
She was speaking yesterday during an Economic Outlook 2025 webinar hosted by First Citizens and the Institute of Chartered Accountants of Barbados.
“The Barbados economy is characterised by resilient economic growth, driven by strong tourism activity, improving labour market dynamics, healthy accumulation of foreign exchange reserves and adherence to the economic programme and reforms, which is underpinned by an [International Monetary Fund] programme and steady improvements in fiscal operations generating consistent surpluses,” Bhagoo-Ramrattan said.
“However, there are risks, debt remains very high, but is forecasted to decline at steady pace to a targeted 60 per cent of GDP by fiscal 2035/2036. Overall risks to the outlook are high and are tilted to the downside due to the country’s high dependence on the global economy.”
She said there were four factors that are likely to shape the economic outlook for 2025, the first which was “US policies, and really Trump’s second term in office, so broadly speaking, increased protectionist trade policies”.
“We’re looking at US fiscal policies in terms of tax cuts and deficit spending, and we’re looking at the implications of mass deportation and the impact on the US labour market,” the economist said.
Effects of tariffs
“Economic growth in the US is projected at 2.7 per cent for this year, just slightly down from an estimated 2.8 per cent last year, and the US economy continues to be supported by robust consumption as well as more accommodative policies such as tax cuts, which should positively impact in the near term.”
She added: “One of the major downside risks to the outlook for the US is really any adverse effects of tariffs and a reduction in the labour force due to lower migration flows to the US.
“Now, while there is no clear indication about the pace and the extent of additional or any new tariffs, one of the major risks to the global economic outlook is any escalation in protectionist trade policies which would have far-reaching implications.
“It could worsen the trade tensions, it would lower investments, it would reduce market efficiencies, . . . of course distort trade flows, and again, disrupt supply chains.”
Regarding geopolitical risks like conflicts in Ukraine and the Middle East, she said the fallout was “farreaching and can cause disruptions in global economic activity, both through trade and financial linkages”. (SC)
