Barbados - Economy
The economy has traditionally been dependent on the production of sugar, rum, and molasses. In the 1990s, however, tourism and offshore banking surpassed sugar manufacturing in economic importance.
The Barbadian economy turned in a good overall performance in 2000. GDP grew by 5%, compared to an average 3.4% per annum in 1994–95, driven by the strong performance of the sectors producing traded goods and services. The upsurge in economic activity led to a sharp decline in unemployment (from 24.5% in 1993, to 9.4% in 2000), while the inflation rate was kept at a relatively low 2.2%.
A large increase in public spending resulted in a fiscal deficit of2.6% of GDP in 1996, in contrast with a 1.3% surplus in 2000. Net international reserves were the equivalent of 18 weeks of imports in 1999.
The economy has traditionally been dependent on the production of sugar, rum, and molasses. In the 1990s, however, tourism and offshore banking surpassed sugar manufacturing in economic importance. The tourist sector in 2000 accounted for 15.5% of GDP, while all services, including tourism, accounted for 78%. Agriculture contributed 6% of GDP and industry, including tourist-related construction, was 16% of the GDP in 2000.
In 2001, in the decline in tourism following the 11 September 2001 terrorist attacks on the United States and in the global economic slowdown that had already taken hold, the Barbadian economy experienced its first contraction (-2.75%) after eight straight years of growth. Despite an increase in tourism over 2001, a further contraction of -1.75% was projected for 2002. From 1998 to 2000, growth had averaged 3.37% as the unemployment rate—which had been 24.5% in 1993—fell from 12.3% to 9.2%. Unemployment increased to 9.9% in 2001, and was expected to be 10.5% for 2002. Inflation, which had averaged 0.9% 1998 to 2000, ticked up to 2.8% in 2001, and was expected to be 2% for 2002.
Much of the constuction undertaken to stimulate the tourist industry was done by the government, resulting in a fiscal deficit that reached 2.6% of GDP in 1996. In 2001, after declining to -0.7% of GDP, the public sector deficit increased to a problematical 3.8% of GDP, and was projected to amount to5.1% of GDP in 2002. IMF examiners recommended that more infrastructural projects be left to the private sector. The country's international reserves position improved somewhat, however, with net international reserves increasing from the equivalent of4.5 months of imports in 1999 to 6 months in 2001 and 5.8 months in 2002.