分类： business

The Central Bank of Barbados has issued a stark warning against implementing sweeping reductions to the nation’s 17.5% Value Added Tax (VAT), cautioning that such untargeted fiscal measures could undermine economic stability while failing to deliver meaningful assistance to populations most severely impacted by rising living costs.

Governor Dr. Kevin Greenidge articulated the Bank’s position during a Wednesday press conference reviewing the country’s 2025 economic outlook. His comments directly addressed campaign promises from opposition parties contesting the February 11 general election, who have pledged significant VAT reductions as a primary mechanism for addressing cost-of-living pressures should they form the next government.

Dr. Greenidge, drawing upon his extensive experience from the International Monetary Fund, presented a detailed economic analysis questioning the wisdom of broad-based VAT cuts. He emphasized that such blanket reductions would provide financial benefits across all economic segments, including affluent demographics who don’t require assistance, rather than concentrating support where it’s most needed.

The Governor highlighted implementation challenges, particularly the uncertain ‘pass-through effect’ where merchants and wholesalers might not fully transfer tax savings to consumers. Using automotive taxation as an example, he explained how importers could retain savings rather than reducing consumer prices, especially in economic environments where prices demonstrate downward rigidity.

Dr. Greenidge advocated for precisely targeted policy measures instead of across-the-board reductions, stating: ‘If your objective is addressing cost of living, you must identify which specific groups you’re trying to impact. Well-designed, targeted measures for vulnerable populations deliver significantly more effective outcomes than broad fiscal changes.’

He noted that VAT reductions typically prove most effective when the tax system is performing optimally and the objective involves stimulating productive sectors, rather than addressing immediate cost-of-living concerns. The Governor concluded that implementing monitoring mechanisms to ensure merchants pass on tax savings would likely incur administrative costs exceeding the actual benefits delivered to consumers.

The Central Bank of Barbados has forecasted sustained economic expansion for the nation through 2026, projecting growth between 2.5% and 3.0% despite emerging global challenges. Governor Dr. Kevin Greenidge announced these projections during a Wednesday briefing at the bank’s headquarters, indicating this would mark the country’s fifth consecutive year of economic improvement following a 2.7% expansion in 2025.

The growth trajectory is primarily driven by robust performance across multiple sectors including tourism, business services, and construction activities in both private and public domains. Inflation is expected to remain moderate, with projections indicating a moving average rate closer to 1% for 2026, gradually settling around 2-2.5% in the medium term.

Governor Greenidge highlighted several favorable factors including declining global commodity prices, particularly energy costs, which should help mitigate imported inflation pressures. However, he noted that strong domestic demand for certain services could exert upward pressure on prices.

Fiscal indicators continue to show improvement with debt levels expected to maintain a downward trajectory through economic expansion and rising primary surpluses. The governor confirmed the country remains on track to achieve its debt-to-GDP target of 60% by fiscal year 2035-36, a key anchor of the Barbados Economic Recovery and Transformation (BERT) program initiated in 2018.

Despite the positive outlook, Dr. Greenidge identified several risk factors including potential slowdowns in major markets like the United States that could reduce tourism demand. He also cited heightened global political tensions, particularly in oil-producing regions, which could trigger inflationary pressures through oil price spikes. Additional concerns include rising shipping costs due to global uncertainty and climate-related impacts on domestic food production.

Conversely, the governor noted potential upside opportunities including stronger-than-expected tourism performance, accelerated infrastructure projects such as the imminent Bim Pay digital payments system, housing developments, and renewable energy initiatives that could further boost economic prospects.

The Central Bank of Barbados has announced a fourth consecutive year of robust economic expansion for the nation in 2025, with GDP growth reaching 2.7%. This sustained growth was primarily propelled by an unprecedented surge in tourism, which catalyzed widespread gains across multiple sectors of the economy.

Central Bank Governor Dr. Kevin Greenidge, presenting the annual economic review at the bank’s Bridgetown headquarters, highlighted a simultaneous improvement in key macroeconomic indicators. Inflationary pressures continued to moderate throughout the year, with the average inflation rate declining by 0.7%. The labor market also showed significant strength, as the unemployment rate dropped to 6.6%, down from 7.1% recorded at the end of the previous September.

On fiscal stability, the government achieved a primary surplus equivalent to 3.3% of GDP, while successfully reducing the national debt-to-GDP ratio to 94.6%. The financial sector demonstrated resilience with credit expansion growing from $9 billion to $9.4 billion. Commercial banks notably improved their asset quality, reducing non-performing loans to 3.6%—the lowest level witnessed since June 2009. International reserves remained robust at approximately $3 billion, despite a widening current account deficit driven by increased imports and softer export performance.

The tourism sector emerged as the undeniable powerhouse behind the economic performance. Long-stay arrivals soared by 3.3% to exceed 727,000 visitors, setting an all-time annual record. This influx was dominated by the U.S. market, which expanded dramatically by 8.1% and accounted for roughly 80% of the additional visitors. Enhanced air connectivity from cities including Boston, New York, Philadelphia, and Atlanta was a critical driver. The CARICOM market also contributed significantly with a 6.1% growth, bolstered by increased flight capacity.

Strategic marketing initiatives yielded positive results from Canada, which saw a 3.5% increase in arrivals, and also supported growth from European markets. A notable exception was the UK market, where arrivals declined by 5.9%, a dip attributed to reduced seating capacity.

The hotel sector reaped substantial benefits from the tourism boom. Average occupancy rates climbed by 1.3 percentage points, while the average revenue per available room surged by approximately 15%. The shared accommodation sector (e.g., Airbnb) also saw occupancy rise by 0.7 percentage points, though revenue per room declined by about 10%, indicating a competitive pricing adjustment by hosts. The cruise segment performed marginally well, with visitor numbers edging up by nearly 1% to 546,000 despite 12 fewer ship calls, reflecting higher occupancy per vessel.

This tourism-driven growth had a multiplier effect across the economy. The agricultural sector experienced a remarkable 13.3% expansion, while construction grew by 9.2%. The business and other services sector advanced by 3.7%, and wholesale and distribution trade saw a 1.1% increase. Manufacturing remained stable without significant growth.

Governor Greenidge concluded that the 2025 economic performance was characterized by its ‘balanced and resilient’ nature, being supported by multiple sectors rather than dependence on a single industry, positioning Barbados on a stable path of continued economic development.