Barbados’ 2026 GDP Growth Forecast Revised Down from 2.1% to 1.9%

• Fitch BMI revised Barbados’ GDP growth forecast for 2026 down to 1.9% from 2.1%, compared with an estimated 2.7% in 2025. The downward revision reflects rising external headwinds linked to a longer-lasting US-Iran conflict, higher inflation and pressure on the key tourism sector.
• Inflation is expected to rise from an average of 0.9% in 2025 to 2.8% in 2026, driven largely by imported price pressures from higher international oil prices and shipping costs.
• The overall budget deficit is forecast to widen modestly from an estimated 0.4% of GDP in FY2025/26 to 1.2% in FY2026/27, as the government increases spending to support growth and cushion households and businesses from higher fuel prices.
• Despite the wider deficit, ongoing fiscal prudence is expected to continue, anchored by a healthy primary surplus. This should support a gradual decline in gross public debt from around 95% of GDP at end-FY2025/26 toward the government’s long-term target of 60%. Additionally, the central bank is expected to maintain the hard exchange rate anchor at BBD2.00/USD, supported by international reserves of around US$1.5Bn.
• Further escalation in the US-Iran conflict could create a more severe oil price shock, pushing inflation higher and placing additional pressure on growth. Rising energy and shipping costs could also intensify cost-of-living pressures and public discontent, while climate-related shocks remain a major risk given Barbados’ reliance on tourism.
• Barbados’ outlook remains relatively stable, but higher oil and shipping costs could pressure tourism, inflation and public spending at the same time. As such, the country’s strong fiscal framework, primary surplus and exchange-rate anchor will be an important buffers if global energy volatility persists.

(Source: BMI, A Fitch Solutions Company)