Barbados: Country and Foreign Investment
Economy and Currency
Barbados experienced economic problems in the 1980s, partly due to politically-motivated populist economic policies which were unsuccessfully resisted by international organisations. After an IMF structural adjustment package, growth returned in the mid-1990s.
Barbados has been partially successful at diversifying its economy away from sugar, which still dominates trade. The crop was sold largely to the EU at a preferential tariff under the Lome Convention. However this regime came to an end in 2006, and the EU's replacement scheme was not nearly as generous.
Tourism has been a success story, accounting for 15% of GDP and half of foreign exchange earnings. There has been a considerable amount of light industrial development, and the high-technology sector is beginning to expand rapidly. Barbados has some indigenous energy, and could hope to be self-sufficient one day. The Government has consistently supported the development of an offshore financial services sector, and this is now the second biggest contributor of foreign exchange after tourism.
GDP per head (2012) was estimated to be around USD25,500 at PPP (among the higher Caribbean figures). Inflation has been under control, but unemployment is a black spot: after reaching as high as 25% during the early 1990s as the IMF austerity programme bit, it had fallen to 11% in 1999, and by 2006 had decreased to 7.6% - the lowest rate for some years. By 2008 however, unemployment had begun to grow again, reaching 8.1% that year, increasing to just over 10% in 2009 and estimated to be 12% in 2012.
The events of 9/11 hit the Barbadian economy hard, and the economy contracted in 2002 mainly due to a 3% decline in tourism. Growth returned in 2003 at 2.2%, and the economy has been growing at a solid pace since. The economy contracted by 5.3% in 2009 in the wake of the global financial crisis. It has seen slight growth of 0.2%, 0.6% and 0.7% in 2010, 2011 and 2012 respectively.
Preliminary figures for 2012 show a 5.5% decline in visitor numbers to the island with a total number of visitors of just over 535,000.
The official unit of currency in Barbados is the Barbadian dollar. The rate of exchange is currently at BDS2 to US$1.
There is exchange control under the Exchange Control Act 1967, applying to inward investment, local borrowing by foreigners, and remittance of funds abroad. Transactions involving foreign investment are normally approved readily. Most types of offshore or non-resident entity and transaction are exempt from exchange controls (see Offshore Legal and Tax Regimes).
Between 2003 and 2006 preparations for the Caribbean Single Market included a gradual dismantling of many aspects of foreign exchange control.
The DLP government of Prime Minister David Thompson, elected in Janaury 2008, pledged to continue the liberalisation of capital controls to encourage growth in the financial services sector.
The global economic crisis hit Barbados very hard. In particular, tourism, financial servcies and the construction industry have taken the brunt of the downturn. An overall contraction of 4% in the economy was recorded for 2009 and growth since then has been below 1% each year. Public debt to GDP has risen from 56% in 2008 to 83% in 2012.