Economic Growth in Barbados Will Slow in 2025 on the Back of U.S. Tariffs

  • Economic growth in Barbados is set to slow in 2025, primarily due to the United States (U.S.) trade policy and a related global economic slowdown. Real GDP is forecasted to expand by 1.7% in 2025 according to Fitch Solutions, moderating from an estimated 4.0% growth rate in 2024. This marks a downward revision from Fitch’s previous 2025 forecast of 2.5%.
  • In 2025, Barbados is expected to be significantly impacted by U.S import tariffs. Almost a fifth of the country's goods exports were sent to the U.S. in 2024, with the largest categories, including beverages (mainly rum), jewellery and various light-manufacturing products such as trailers. These products will lose some competitiveness in the U.S. market due to the 10% baseline tariffs. Furthermore, real GDP growth in the U.S. is expected to slow from 2.8% in 2024 to 1.2% in 2025, weakening demand for imported goods generally.
  • More importantly, lower tourism arrivals will be the main drag on economic growth due to the negative impact on export receipts and the knock-on effect on private consumption and investment. Although exempt from U.S. tariffs, tourism receipts in Barbados will be negatively affected by U.S. trade policy. A tariff-induced economic slowdown in the U.S. and other tourism source markets will weaken arrivals in Barbados.
  • Barbados has increased its reliance on US tourists in recent years as airline passenger capacity between the two countries doubled over the past decade. U.S. tourists typically make up a third of total arrivals and accounted for three-quarters of the growth in tourism arrivals in 2024. The U.K., Canada and the EU account for another 50% of tourists, and Fitch forecasts slower economic growth in all these markets in 2025.
  • Overall, services exports (mainly tourism) are expected to contract by 2.0% in real terms in 2025, the first decline since the Covid-19 pandemic. Consequently, weakness in the tourism sector will drag on private consumption and investment growth in the wider economy as the sector accounts for around 15% of GDP and 20% of employment (directly and indirectly).

(Source: Fitch Connect)