Bridgetown, Barbados – June 2025
Barbados’ financial sector has emerged from the turbulence of the COVID-19 pandemic profitable and resilient, but an economist at the Inter-American Development Bank (IDB) has cautioned that global economic headwinds still pose potential risks to the island’s positive economic outlook.
Speaking at the 2025 Global Industry Update Virtual Seminar hosted by BIBA, the Association for Global Business, IDB economist Cloe Ortiz de Mendivil praised the island’s fiscal progress while underscoring areas that require continued vigilance.
The financial sector has praised for its significant strides as she noted, non-performing loans as a share of total loans have declined to below four percent — a key indicator of financial stability — and there were presently no liquidity concerns in the banking system.
Ortiz de Mendivil also pointed to strong tourism performance as a major contributor to economic recovery, with first-quarter visitor arrivals this year up 26 percent over the same period in 2024.
She underscored several macroeconomic positives, including Barbados’ robust foreign reserves, which stand at approximately $3 billion, and the island’s improving debt profile.
The economist said the country was on track to meet its target of reducing the debt-to-GDP ratio to 60 percent within the next decade — a level widely regarded as sustainable and fiscally healthy,” she said.
However, she warned that sustaining this path would require high and consistent fiscal and primary surpluses.
She told participants that while the government had demonstrated commitment to fiscal reform, there was still limited fiscal space, which meant there is less room for public investment, Ortiz de Mendivil explained. “That’s why the government is calling for bigger action from the private sector, and higher private sector investment participation,” she stated.
Despite low unemployment and a downward trend in inflation, the economist expressed concern that wage growth was not keeping pace with the cost of living.
“Households have less and less disposable income, and this affects particularly lower-income households, where most of their expenditures go towards food items. And food items have seen an increase that is well above what we see when we look at the overall inflation. So that’s something that needs to be taken into account.”
Ortiz de Mendivil also flagged external threats that could derail the island’s growth trajectory. Chief among them: ongoing global trade tensions and tariff disputes, which she warned could disrupt supply chains, stoke inflation, and affect the travel decisions of tourists from key source markets in North America and Europe.
She concluded that while Barbados has earned international praise for its reform efforts and is projected to grow by around 3 percent in 2025, sustained vigilance and adaptive policy measures will be critical to safeguarding its economic gains. (BIBA)