Barbados WT/TPR/S/101
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I. THE ECONOMIC ENVIRONMENT
(1) INTRODUCTION
1. The Barbados economy performed well between 1993 and 2000, driven by an expansion in
domestic consumption.  This expansion went hand in hand with rising standards of living;  GDP
per capita reached US$9,700 in 2000.  Private building activity has been particularly strong in recent
years, reflecting the lack of restrictions on residential purchases by non-residents.  Sound monetarypolicies, underpinned by a fixed exchange rate, have ensured investor confidence and provided a
framework of low inflation.  The Government's policy of extensive consultation has provided a stable
policy environment.
2. However, the economy remains vulnerable to external shocks, as witnessed by the depth and
duration of the recessions experienced by Barbados when the world economy slowed during the early1990s, and again in 2001/02.  Rather large fiscal deficits and the existence of a fixed exchange rate
policy limit the room for counter-cyclical policies.
(2) S
TRUCTURE OF THE ECONOMY
3. Barbados is the most easterly island in the Caribbean chain of islands.  At the end of 2001, its
population was close to 270,000, and average annual growth rate was 0.4% over the 1981-00 period.
Barbados is one the world's most densely populated countries.  In 1999, it ranked 31st in terms of the
United Nations' Human Development Index, with a life expectancy at birth of 76.6 years, and an adult
literacy rate of 97%.1  It also ranked 31st worldwide in terms of GDP per capita in purchasing power
terms.  In constant 2000 prices, GDP per capita averaged US$9,700 at the end of 2000, up from
US$8,700 in 1990.
4. Historically, the Barbados economy was developed on exports to the United Kingdom of
cotton, tobacco, and subsequently sugar, but since the 1950s the economy has become increasinglyservices based, and in particular increasingly reliant on tourism exports.  Simultaneously, there has
been a falling share of agriculture, notably sugar, in GDP.  The development of the "offshore"
international business and financial services sector, which began around 1977, now also contributes to
national income.  The authorities have noted that Barbados's economic development has also been
enhanced by the absence of restrictions on the acquisition of property by foreigners.
5. Over the past 20 years, real GDP growth in Barbados has averaged 1.2% annually.  This
average masks periods of relatively rapid growth interrupted by strong recessions, particularly in
1990-92 and 2001, when the world's economic slowdown considerably reduced the demand for
tourism services.  Changes in real GDP are closely associated to variations in tourist arrivals
(Chart I.1).  Indeed, this latter variable alone seems to explain a large proportion of the changes inBarbados's real GDP over the last 20 years.
2  This, in turn, points to an economy highly exposed to a
narrow range of external factors over which Barbados's policy matters have little or no control.
6. Over the last two decades, the most dynamic sectors overall were tourism, and transport and
communications.  Negative overall growth rates were recorded for sugar production, while GDP in
                                                     
1 These statistics are calculated by the United Nations and are available online at:  http://www.
undp.org/hdr2001/indicator.
2 A simple regression analysis suggests that over 1979-01 some 60% of the variation in real GDP was
explained by fluctuations in tourist arrivals.  The analysis also suggests that a 10% variation in tourist arrivalsleads to a 3.8% change in real GDP in the same direction.WT/TPR/S/101 Trade Policy Review
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manufacturing stagnated.  In terms of national expe nditure, personal and public consumption by far
outpaced the expansion of trade and that of capital stock (Chart I.2).
7. Private consumption continued to be the en gine of economic growth over 1997-00, together
with private building activity.  This could be related to the growth in tourism, as well as the
development of the residential property market, as an increasing number of foreigners purchased
residences in Barbados.
(i) Recent economic developments
8. After a major recession during the three years from 1990 to 1992, Barbados recorded eight
years of consecutive GDP growth, at an average pace of 3% annually in real terms over 1993-00.
Growth was unchanged in 2000, at 3% (Table I.1), sustained by a strong performance of tourism that
year.  Economic growth translated into a la rge reduction in the unemployment rate, from 24.3%
(1993) to 9.2% of the labour force in 2000.  Unempl oyment was estimated to have increased again, to
10.3%, by September 20013;  it remains one of Barbados's main economic challenges.
                                                     
3 Central Bank of Barbados (2002).-8-6-4-20246810
1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001-16-12-8-4048121620Chart I.1
Annual changes in real GDP and tourist arrivals, 1979-01
% change in real 
GDP  (    GDP)
GDP
WTO Secretariat, based on Ministry of Finance and Economic Affairs, Barbados Economic and 
Social Report, 2000;  and data provided by government authorities. % change in tourist 
arrivals  (    T)
Tourist arrivals
(right axis)
Source: GDP =0.5+0.38 T
(t = 5.6)
R2= 0.60 Barbados WT/TPR/S/101
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9. The economy was estimated to have contracted by 2.6% in real terms in 2001.4  T h e
economic slowdown that was already apparent in the first nine months of the year was compounded
by the 11 September attacks on the United States, and their impact on the demand for tourism services
in Barbados.  Real value added in tourism declined by an estimated 5.9% in 2001.  Some other
sectors, especially manufacturing and agriculture, continued to contract as they tried to adjust to the
recent removal of quantitative limits on imports (Chapter III(2)(v)).  All the major subsectors of
manufacturing registered decreases, with value added contracting by 3.3% in food processing, by4.8% in beverages, by 30.3% in electronics, and by 5.5% in chemicals.
10. In October 2001, the Government announced the National Emergency Economic and
Financial Programme to address the consequences of the recession.
5  The programme was due to be
implemented over a period of three months, and aimed to preserve employment, maintain a
satisfactory level of economic activity, and ensure the viability of domestic producers.The programme included an "intervention package" of BDS$32 million, most of which was to be
provided to the tourism sector.
6
                                                     
4 Estimates from the Central Bank of Barbados online information.  Available at:
http://www.centralbank.org.bb/cbb/ cbb.nsf/index.htm?OpenPage.
5 This Programme is available from the Ministry of Economic Development online information.
Available at:  http://www.barbadosbusiness.gov.bb/miib/Publications/Documents/economic_financial_programme.pdf.
6 Ministry of Economic Development online information.  Available at:  http://www.barbadosbusiness.
gov.bb/miib/Publications/publications.cfm.01.12.23.34.45.5
1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001Chart I.2
Gross domestic product indicators, 1979-00
BDS$ billion
GDP at market prices
Consumption 
expenditure
Exports of goods 
and services
Imports of goods 
and services
Gross capital formation
Source: Ministry of Finance and Economic Affairs (2001), Barbados Economic and Social Report, 2000 .WT/TPR/S/101 Trade Policy Review
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Table I.1
Basic macroeconomic indicators, 1997-01
1997 1998 1999 2000 2001
I. Gross domestic product (GDP)
GDP current (BDS$ million) 4,412.6 4,747.1 4,970.0 5,200.8 ..
Real GDP (1974 BDS$ million) 890.0 927.4 954.2 982.5 954.8
Nominal GDP (US$ million) 2,206.3 2,373.6 2,485.0 2,600.4 ..
Nominal GDP per capita (US$) 8,315 8,908 9,304 9,716 ..
  Sectoral breakdown (% of current GDP)
Agriculture - sugar 1.9 1.4 1.4 1.5 ..
Agriculture - non-sugar 3.4 2.5 3.5 2.9 ..
Mining and quarrying 0.6 0.6 0.7 0.7 ..
Manufacturing 6.2 6.2 6.3 6.2 ..
Electricity, gas and water 3.2 3.3 3.2 3.2 ..
Construction 5.6 5.7 5.8 5.8 ..
Services – non-government 61.6 63.1 61.9 62.2 ..
Services – government 17.5 17.2 17.2 17.4 ..
  Breakdown by expenditure (% of current GDP)
Total consumption 84.1 83.7 86.6 87.3 ..
Private 63.1 63.0 65.9 66.5 ..
Public 21.0 20.7 20.7 20.8 ..
Total investmenta17.9 18.4 19.4 18.2 ..
Exports of goods and services 55.3 53.1 50.8 50.6 ..
Imports of goods and services -57.3 -55.2 -56.8 -56.1 ..
  Real rates of growth (%)
Total GDP 2.8 4.2 2.9 3.0 -2.6
Agriculture - sugar 9.3 -25.7 10.9 9.7 -14.7
Agriculture - non-sugar -7.6 -3.3 8.5 0.1 -3.5
Manufacturing 3.8 3.4 -2.4 -0.5 ..
Electricity, gas and water 3.8 9.1 5.0 0.0 ..
Construction 14.8 19.7 5.7 4.0 ..
Services – non-government 2.6 5.2 2.3 4.7 ..
Exports of goods and NFS -0.7 3.2 0.3 5.5 ..
Imports of goods and NFS 16.3 3.6 6.3 4.2 ..
Nominal growth rates (%)
Total consumption 15.8 7.0 8.4 5.5 ..
Private 18.1 7.3 9.6 5.5 ..
Public 9.4 5.8 4.6 5.6 ..
Finished capital stock 27.0 9.4 8.2 -3.5 ..
Private building activityb19.2 18.1 4.4 5.1 ..
Public building activityc40.5 -15.6 25.0 -4.8 ..
II. Employment and prices
Rate of unemployment (%) 14.5 12.3 10.4 9.2 10.3
Consumer price index (% change) 7.7 -1.3 1.6 2.4 2.6
Table I.1 (cont'd)Barbados WT/TPR/S/101
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1997 1998 1999 2000 2001
III. Money and interest rates (end of period;  annual change)
M1 21.9 4.3 6.2 8.6 6.5
M2 10.8 5.7 9.9 10.1 5.4
Real effective exchange rate (12 month basis) 5.1 -1.1 4.1 6.0 ..
Treasury bill rate (%, annual average) 4.91 5.70 6.05 3.85 ..
Minimum savings rate (%;  annual average) 4.0 4.0 5.0 4.5 3.0
.. Not available.
a Finished capital goods, change in stocks and building activities.
b Land development included.
c Central government only.
Source: Ministry of Finance and Economic Affairs (2001), Barbados Economic and Social Report – 2000,  July;  and data
provided by the Government of Barbados.
(ii) Public finances
11. In the past, fiscal deficits have constituted a source of financial instability for the Barbados
economy, resulting in structural adjustment measures being adopted in the early 1990s.  In 2000/01,
the Central Government ran an estimated overall fi scal deficit of BDS$290 million, or over 5% of
GDP at market prices (Table I.2).  A large share of this deficit consists of amortization payments on
domestic and foreign debt:  net of amortization, the deficit stood at BDS$92 million, or just over 2%of GDP.  In early 2002, the authorities did not consider that the fiscal deficit was an immediate source
of concern.
Table I.2
Central government operations, 1996-01
(BDS$ million)
1996/97 1997/98 1998/99 1999/00 2000/01a
Current revenue 1,232.2 1,458.8 1,555.4 1,625.9 1,727.2
Tax 1,160.8 1,386.6 1,485.2 1,562.0 1657.3
Non-tax 71.4 72.2 70.2 63.9 69.9
Current expenditure 1,308.0 1,447.5 1,561.3 1,675.9 1,701.0
Amortization 175.5 196.8 231.9 248.5 198.7
Other 1,132.5 1,250.7 1,329.4 1,427.4 1,502.3
Current surplus/deficit -75.8 11.3 -5.9 -50.0 26.2
Capital expenditure 222.2 245.7 257.5 261.3 289.6
Net lending 3.4 11.7 0.0 4.5 12.7
Overall surplus/deficit -301.4 -246.1 -263.4 -315.8 -290.0
Financing
Domestic 216.5 199.2 154.6 176.7 223.9
Foreign 85.0 46.9 108.9 139.0 52.2
Overall deficitb as % of GDP -7.5 -5.6 -5.5 -6.4 -5.3
a Provisional figures.
b Calendar year GDP corresponding to first year heading.
Source: Ministry of Finance and Economic Affairs (2001), Barbados Economic and Social Report – 2000,  July.
12. One third of total expenditure was spending on wages and salaries in 2000/01.  Payments
towards pensions and other transfers amounted to another 26% of the total;  and debt service,
including interest and amortization, accounted for 23%.  Capital expenditure amounted to 12% ofWT/TPR/S/101 Trade Policy Review
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total public expenditure, and consisted mostly of the Public Sector Investment Programme.  The latter
currently includes an educational programme (EduTech 2000), a sewerage project, and road
improvement schemes.  Capital transfers to state enterprises amounted to BDS$56 million, or 3% of
total public expenditure and 1.1% of GDP in 2000/01.
13. Central Government revenue in 2000 relied mostly on taxes receipts (94% of total revenue in
2000/01).  The largest share of tax revenue comes from indirect taxes on goods and services (45%), inparticular VAT (29%).  In addition, international trade taxes amount to 8% of revenues.  Corporation
taxes increased in 2000/01 as business profitability expanded; in 2001, they represented nearly 15% of
total revenue, compared with 19% for personal income tax.  Property taxes represent nearly 6% of
total revenue.
14. The Budget for fiscal year 2001/02, which was approved by the Barbados Parliament in
March 2001, was projected to increase the central government deficit to 3.5% of GDP excluding
amortization.  The Financial Statement of August 2001, however, planned for a lower central
government deficit of 2.7% of GDP at market pric es excluding amortization.  The increase in the
deficit relative to 2000/01 would be due to higher wages to compensate public-sector workers for
salary cuts in 1991;  to rising interest payments on external debt;  to increased capital expenditure;and to an expected decline in income tax reve nues following the economic slowdown.  In addition to
central government operations, public-sector accounts include large current and capital expenditure on
public enterprises, and income from the National Insurance Scheme.
15. In December 2001, the level of public debt stood at US$1,855 million, up from
US$1,635 million (43% of GDP) at December 2000.  The domestic portion of the debt was
US$1,193 million. The stock of foreign debt was US$662 million, up from US$485 million (23% of
GDP) at end December 2000.  The rise resulted from increased external commercial borrowingdestined to increase international reserves  as a precautionary measure against balance-of-payment
pressures.  Barbados had a AA- long term credit rating in local currency from Standard & Poors in
early 2002.
7
(iii) Monetary policy
16. Monetary policy is carried out by the Central Bank of Barbados (CBB) under the framework
of a fixed exchange rate system with the U.S. dollar.  The Barbados dollar is pegged to the U.S. dollar
at BDS$2 per US$1.8  The main objective of monetary policy is the maintenance of the exchange
rate's fixed parity with the U.S. dollar, and thus the maintenance of a sufficient level of foreign
exchange reserves.  Other objectives include the promotion of monetary stability and of a sound
financial structure, the development of money and capital markets, and the maintenance of credit andexchange conditions that foster economic development.
17. The inflation rate in Barbados is particularly sensitive to exogenous factors, such as variations
in the oil price, and changes in the U.S. dollar exch ange rate versus currencies of other major trading
partners, as these cause changes in import prices.  Efforts are made, however, to keep inflation low in
harmony with Barbados's fixed exchange rate policy, so as to prevent an excessive appreciation of the
real effective exchange rate, which would be detrimental to the export sector.  The exception was a
peak of 8% in 1997, the year of implementation of the value added tax (VAT).  Inflation has been on
a rising trend since early 1999.  Retail prices rose at an annual average rate of 2.6% over the twelve
                                                     
7 Standard & Poors online information.  Available at:  http://www.standardandpoors.com/
RatingsActions/RatingsLists/Sovereigns/ SovereignsRatingsList.html.
8 Commission charges of 0.125% and 1.75% apply when buying and selling the dollar.  Higher
commissions apply for the Canadian dollar, the euro, and the pound sterling.Barbados WT/TPR/S/101
Page 7
months ending December 2001, compared with a rate of 2.4% for the corresponding period ending
December 2000.  Inflation in 2001 was anticipated to be in the region of 3.5%.9
18. The Government has a policy of linking wage increases to productivity increase.  The
Barbados National Productivity Council is responsible for measuring improvements in productivity,
and determining appropriate wage levels in consultation with government trade unions and employers.
This determination takes into account such factors as exchange rate stability, competitiveness, and the
reduction of social disparities through increased employment.
19. The real effective exchange rate appreciated by an average 3.5% annually over 1997-2000
(Table I.1).  This partly reflected the depreciation of the Canadian dollar, the euro, and the pound
sterling against the U.S. dollar.  The appreciation did not result from domestic price increases, as
Barbados was able to keep inflation close to the levels of its main trading partners.  While theappreciation has probably been detrimental to competitiveness in the goods sector, its effects on
tourism are likely to be partly superseded by other factors, such as quality of service, or the evolution
of hotel and restaurant prices vis-à-vis the CPI.  According to data provided by the authorities, there
are no signs of a loss in competitiveness in the tourism industry, as Barbados's share of arrivals to the
region remained stable over the 1995-2000 period.
20. The Central Bank relies mainly on monetary instruments (rather than inflation targetting) for
the monitoring of monetary conditions and the implementation of monetary policy.  Its main
instrument of intervention is the modification of shor t-term interest rates, and the setting of reserve
requirements.  In particular, banks are required to maintain a percentage of their commercial bank
deposit liabilities in the form of a non-interest-bearing cash deposit with the Central Bank;  they must
also maintain a percentage of their total deposit liabilities in government securities (see Annex I.1).
21. The authorities indicated that because of the oligopolistic nature of the Barbados financial
market environment, the Central Bank tends to focus more on commercial bank credit than the
traditional money supply as the critical monetary control variable.  It therefore uses the level of
private sector credit as a short-term indicator of the warranted direction of monetary policy.  The level
of net international reserves is also used on a regular basis to monitor developments.
22. For example in 1999, the growth of domestic deposits at financial institutions outpaced the
growth of private sector credit.  To address the resulting excess liquidity, the Central Bank tightened
monetary conditions by increasing the minimum deposit rate at which the commercial banks may
remunerate customers, from 4% to 5%.  Subsequently, as evidence mounted of an economic
slowdown, the Central Bank reduced the minimum rate on several occasions.  In early 2002, the
minimum deposit rate was 3%.
23. The Central Bank's discount rate was also lowered from 10% prior to April 2001 to 7.5% by
the end of 2001.  According to the Central Bank, the discount window is seldom used by banks.
Therefore the discount rate is used primarily as a signal of the direction in which the Central Bank
would like rates to move.
24. The authorities have indicated that reducing the minimum cash reserve requirement is
designed to provide commercial banks with more funds, which hopefully they will lend out.  The
authorities also noted that the focus is not to reduce excess liquidity, but to stimulate credit to the
private sector.
                                                     
9 Central Bank of Barbados (2002).WT/TPR/S/101 Trade Policy Review
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25. In 2001, the Central Bank also began to set compulsory weighted average lending rates for
banks on selected categories of loans, which were to be no higher than 10% by August, 9.5% by
September, and 8.5% by December 2001.  This measure could constitute a step backwards from
financial liberalization, and from the free movement of capital.
26. Over the years, the Government has gradually liberalized controls on foreign exchange
transactions.  In early 2002, rather extensive controls were in place on capital account transactions,while most current account transactions appeared to be, in practice, free of restrictions.  These
measures are administered by the Central Bank in order to ensure an adequate level of reserves to
maintain the fixed exchange rate peg.  They are summarized in Annex I.I.
(3) B
ALANCE -OF-PAYMENTS AND TRADE AND INVESTMENT FLOWS
27. Barbados is sensitive to external developments, with exports and imports of goods and
services amounting together to just over half of GDP.  In recent years, strong growth of domestic
consumption has been concomitant with a sharp expansion of merchandise imports, and a
deterioration of the merchandise trade balance (Chart I.3).  On the export side, nearly 46% of all
export revenues come from tourism receipts.
28. In contrast with most of the preceeding twenty years, between 1997 and 2000 current account
transactions showed a continuous and large deficit (Table I.3), which tripled during the period.  The
worsening current account deficit position observed between 1997 and 2000 was generally
compensated by the capital and financial account surplus.  The main source of capital inflows has
been public and private sector borrowing for construction projects and reserve accumulation, rather
than foreign direct investment.
29. The September 2001 attacks on the United States, through their effect on tourism, were
initially expected to worsen Barbados's current account deficit in 2001.  In the event, the externalcurrent account deficit was reduced from 5.8% of GDP in 2000 to 3.5% of GDP in 2001, mainly
because of a fall in merchandise imports (Table I.3).
(i) Merchandise trade
30. Revenues from exports of merchandise have remained relatively small, at about one fifth of
total exports of goods and services, and 11% of GDP.  Exports decreased strongly in 2001 (Table I.3).In contrast, imports expanded sizeably since the recession year of 1992.  The result was a growing
merchandise trade deficit until 2000.  In 2001, imports of consumer goods were 4.4% lower;  this was
principally due to a contraction in motor car impor ts.  Inflows of capital goods declined by 8% on
account of a reduction in machinery imports; purchases of intermediate goods were down by 12.5%,
reflecting lower imports of construction materials, and a fall in oil prices over the year, whichsignificantly reduced outlays for fuel.
10
                                                     
10 Central Bank of Barbados (2002).Barbados WT/TPR/S/101
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Table I.3
Balance of payments, 1997-01
(US$ million)
1997 1998 1999 2000 2001
Current account balance -49.3 -62.5 -147.5 -150.2 -88.4
Merchandise trade balance -598.7 -650.6 -714.2 -744.0 -694.6
Exports 289.0 270.1 275.3 286.3 190.1
Imports 887.7 920.7 989.4 1,030.3 884.7
Net income -47.7 -56.1 -71.5 -82.3 -82.3
Revenues 60.4 63.4 66.7 70.2 ..
Investment income 46.1 48.9 51.8 54.4 ..
Compensation of employees 14.3 14.6 14.9 15.8 ..
Expenditures 108.1 119.5 138.1 152.5 ..
of which
Equity 25.5 29.4 33.9 39.3 ..
Payments on government debts 25.0 24.4 32.9 36.6 ..
Payments on other debts 43.2 48.9 51.5 55.3 ..
Services, net 549.8 591.4 571.1 602.9 604.7
Revenues 959.3 1,023.6 1,029.3 1,090.2 ..
Travel 663.4 711.9 686.8 723.0 705.9
Transportation 20.6 21.1 23.1 24.8 ..
Other non-factor services 275.3 290.7 319.4 342.5 ..
Expenditures 409.5 432.2 458.2 487.4 ..
Transportation 140.9 146.8 156.8 163.5 ..
Travel 78.8 82.2 86.7 94.1 89.7
Table I.3 (cont'd)-0.75-0.45-0.150.150.450.751.05
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001Chart I.3
Merchandise trade balance, 1985-01
US$ billion
Source: Central Bank of Barbados, Balance of Payments 2001;  and data provided by Government of Barbados. Trade balanceImports
ExportsWT/TPR/S/101 Trade Policy Review
Page 10
1997 1998 1999 2000 2001
Other non-factor services 189.8 203.3 214.7 229.8 ..
Exports of goods and services 1,248.7 1,293.7 1,304.6 1,376.6 ..
Imports of goods and services 1,297.1 1,352.9 1,447.6 1,517.7 ..
Transfers 47.3 52.8 67.0 78.4 83.8
Revenues 72.3 78.9 94.7 109.4 ..
Government transfers 1.2 1.2 2.4 3.4 ..
Private transfers 71.2 77.8 92.4 106.0 ..
Expenditures 25.1 26.2 27.7 31.0 ..
Government transfers 4.1 5.2 4.6 6.1 ..
Private transfers 21.0 21.0 23.1 25.0 ..
Capital and financial account balance 39.4 24.1 137.7 324.5 244.1
Capital account 0 0.7 0.7 -1.8 ..
Foreign direct investment 13.6 14.8 16.1 18.4 ..
Portfolio investment -18.7 -24.6 -24.3 -20.2 ..
Other investment, net 44.6 33.3 145.3 328.1 ..
of which
Public sector borrowing -30.2 -12.9 50.3 119.9 ..
Private sector borrowinga74.7 46.1 95.0 208.2 ..
Errors and omissions 47.5 1.1 65.4 21.4 ..
Valuation adjustments -21.9 31.7 -18.6 -22.8 ..
Change in net reserves (increase -) -15.7 5.6 -36.9 -178.0 -223.2
Memorandum items:
Current account (share of GDP, %) -2.2 -2.6 -5.9 -5.8 -3.5
International reserves (months of imports) 3.4 3.1 3.4 5.5 9.1
.. Not available.
a Trade credits, deposits in overseas banks and others.
Source: Central Bank of Barbados, Balance of Payments, 2001;   and information provided by the authorities.
(a) Geographical pattern of merchandise trade11
31. Over 40% of imports (Table AI.1) originate in the United States, up from 34% in 1990.
Imports from the United States have increased particularly fast since 1992 (Chart I.4).  Import growth
from Europe exhibited no clear trend during the 1980s, and also accelerated after the recession of
1992, albeit at a slower pace.  Imports from the CARICOM region have increased consistently since
the mid-1980s, to represent 20% of total imports in 2000, coinciding with expanding tariffpreferences.  Among the other trading partners, exceptional import growth since 1995 has been
recorded for China and Brazil.  Imports from Brazil grew mainly for machinery and vehicles.  Imports
from China grew across a wide range of manufactured products.
32. The geographical pattern of merchandise trad e shows a jump in exports to the CARICOM
region in 1994, the year of implementation of the first phase of the CARICOM tariff reductionprogramme (Chart I.4).  Meanwhile, exports to Europe have declined, reflecting the depreciation of
the euro and the fall in sugar export revenues.  E xports to the United States have followed a modestly
increasing trend (Table AI.2).
                                                     
11 This section and the following (product pattern of merchandise trade) are based on Customs rather
than balance-of-payments data.Barbados WT/TPR/S/101
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020406080100120
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000Chart I.4
Trade trends, 1990-00
US$ million
CARICOM
Europe
United States
Source: Central Bank of Barbados (2000), Annual Statistical Digest .0100200300400500
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000CARICOMEuropeUnited StatesUS$ millionExports
ImportsWT/TPR/S/101 Trade Policy Review
Page 12
(b) Product pattern of merchandise trade
33. Import growth has been strong in machinery (Table AI.3), perhaps reflecting the demand for
capital and intermediate goods for large infrastructure projects in hotels, roads, the port and the
airport.  Imports of refined oil products have also increased strongly, reflecting the closure of the
domestic refinery.  Imports of food have declined as a share of total imports.  This in turn could partly
be the result of the self-sufficiency policy adopted since the mid-1990s.  Exports consist mostly ofsugar, rum, crude petroleum, medicaments, insecticides, as well as electronic microcircuits and
resistors, and stationery (Table AI.4).
(ii) Trade in services
34. Until 1997, the merchandise trade deficit was more than counterbalanced by a large surplus of
the services account.  Net foreign receipts from non-factor services expanded substantially throughout
the 1990s, although not as fast as merchandise imports.  The majority of credits result from travel
receipts (Chart I.5), reflecting the importance of tourism.  Two types of traveller visit Barbados:  long-
stay tourists (who stay at least overnight and up to  one year), and excursionists, who generally come
for less than 24 hours aboard a cruise ship.  Inco me from excursionists remains considerably smaller
than tourist income (US$55 million versus US$656 million in 2000), but expanded at a brisk pace
during the 1990s.
-1500150300450600750
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000Chart I.5
Current account balance and net foreign receipt from services, 1985-00
US$ million
Source: Central Bank of Barbados, Balance of Payments,  2001 . Total net receiptsTravel
TransportFinancial and other services
Current account balance
35. The second largest source of services export revenue is financial services, which in 2000
generated net foreign receipts of over US$70 million (Table I.4).  These receipts to a large extent
reflect the foreign exchange transactions of offshore banks and other financial companies (excluding
insurance).  Exports of financial services are low in relation to value added in financial and business
services, which reached US$385 million in 2000.Barbados WT/TPR/S/101
Page 13
Table I.4
Trade in non-factor services, 1997-00
(US$ million)
1997 1998 1999 2000
Non-factor services, balance 549.8 591.4 571.1 602.8
Credit 959.2 1,023.6 1,029.4 1,090.2
Travel 663.4 711.9 686.8 723.0
Business 2.9 3.1 3.5 3.8
Personal 660.6 708.9 683.4 719.2
Long-stay tourists 604.9 651.8 632.4 656.5
Excursionists 52.3 51.2 43.7 54.9
Others 3.3 5.9 7.3 7.9
Transportation 20.6 21.1 23.1 24.8
Insurance 65.2 68.3 75.0 79.5
Life insurance and pension funds 32.1 35.1 39.8 42.3
Freight insurance 2.8 3.1 3.8 4.2
Others 30.3 30.1 31.4 33.1
Communication 26.0 26.9 27.3 27.8
Management fees 12.2 13.4 15.9 17.3
Financial services 59.2 64.3 68.3 75.2
Computer and information 26.2 23.6 17.8 17.4
Merchanting and other trade-related business 25.5 26.5 33.2 34.8
Other miscellaneous businessa34.6 38.9 49.9 55.7
Government, n.i.e. 26.5 29.0 32.3 34.9
Debit 409.4 432.3 458.3 487.4
Travel 78.8 82.2 86.7 94.1
Business 29.4 30.6 31.5 32.7
Personal 49.4 51.6 55.3 61.4
Transportation 140.9 146.8 156.8 163.6
Air transport 61.2 64.6 68.0 70.9
Passenger fares 41.3 44.0 45.0 46.7
Freight and others 19.9 20.6 23.0 24.2
Sea transport 79.8 82.2 88.9 92.7
Freight 79.7 80.8 88.7 92.5
Others 0.1 1.4 0.2 0.2
Insurance 90.7 95.7 101.6 109.5
Life insurance and pension funds 26.4 30.3 33.2 34.2
Freight insurance 10.0 10.1 11.2 11.6
Others 54.4 55.3 57.2 63.8
Communication 4.7 5.1 6.8 7.9
Management fees 10.4 11.0 11.6 12.8
Financial services 3.2 4.4 4.9 5.1
Computer and information 4.4 4.9 5.2 5.2
Merchanting and other trade-related business 11.6 11.8 12.1 12.6
Other miscellaneous businessa44.5 47.6 47.5 49.6
Government, n.i.e. 20.4 23.1 25.3 27.4
.. Not available.
a Includes construction, royalties and license fees, operational leasing, and personal, cultural and recreational services.
Source: Central Bank of Barbados, Balance of Payments  2001 .WT/TPR/S/101 Trade Policy Review
Page 14
36. Trade in insurance services is also substantial, and has been growing;  the trade balance is
negative (Chart IV.3).  The expansion has come mostly from reinsurance.  Debits have increased as
domestic insurance companies have been encouraged  to spread risks by purchasing reinsurance on
international markets.  Credits represent premiums received from regional branch offices of local
insurance companies and commissions receivable on reinsurance placed on the international markets.
37. Trade in transportation services is also large, reflecting the importance of freight and
passenger air transport.  Most trade flows are debits, as Barbados does not possess a significant
maritime fleet or airline.
38. In communications, the net surplus of US$20 million in 2000 reflected the higher number of
incoming international calls over calls abroad by residents.  Because of the accounting rate system,
the originating carrier bills the customer for international calls and compensates the carrier in thecalled country for terminating calls, based on the (fixed) settlement rate, which has traditionally been
set as one half of the (theoretical) total cost of completing the call.  The surplus mirrors this
compensation.  As competition has increased, commercial negotiations between carriers are
progressively supplanting these regulations (Chapter  IV(5)(vii)).  In recent years, debits resulting
from communications services have increased sharply.
(iii) Income and net transfers
39. Barbados's net income account has registered a growing deficit, reaching US$82 million in
2000, as Barbados residents increased direct and portfolio income payments to non-residents.  These
payments include dividend income, and interest payments on foreign debt.  On the other hand, net
transfers have also expanded sizeably, to reach US$78 million in 2000.  These consist mostly of
workers' remittances.
(iv) Capital and financial flows
40. The capital and financial account registered a sizeable surplus of US$325 million in 2000,
reflecting increased public-sector borrowing as well as long-term private-sector inflows.  The private-
sector inflows occurred mainly for hotel-related projects, including new construction, refurbishment,
and expansion.  The increased public-sector borrowing in 2000, which resulted in increased reserves,
was designed as a precautionary build-up for trade and financial liberalization or unexpected externaldevelopments.  Liquid foreign assets represented roughly 37 weeks of imports at the end of 2001,
compared with 22 weeks at the end of 2000.
41. Foreign direct investment in Barbados reached over US$18 million in 2000 (Table I.3), and
has exceeded US$10 million in each year since 1997.  It consists of investment in existing branches of
foreign companies, of undistributed and unrepatriated earnings, and of new capital.
(4) O
UTLOOK
42. The outlook for the Barbados economy and trade will be significantly determined by the
speed of recovery in the economies of Barbados's trading partners, especially the United States and
the United Kingdom.  Projections for 2002 suggested that real output in Barbados should remain
relatively flat, and inflation at around 3.5%.12  Real value added in the tourism subsector was
projected to fall further, albeit by less than half that of 2001.  Sugar production was forecast to
contract by 15-20%, on account of a reduction in the acreage planted and lower yields.  However,
non-sugar agriculture and fishing, along with manufacturing, were expected by the Central Bank to
                                                     
12 Central Bank of Barbados (2002).Barbados WT/TPR/S/101
Page 15
show marginal increases, attributable in part to the buy-local campaign and to the increase to 60% of
the tariffs on domestically produced manufactured goods.  The construction sector was expected to
benefit from the public investment programme and other proposed private-sector ventures.  Wholesale
and retail trade were projected to be constrained by the fall in tourism output.
43. The current account deficit was expected to increase in 2002 relative to 2001, owing mainly
to a moderate rise in imports as domestic demand picked up.  The fiscal deficit before debtamortization was projected to be in the region of 3.5%-4% of GDP, primarily on account of the
reduction in economic activity.WT/TPR/S/101 Trade Policy Review
Page 16
Annex I.1:  Barbados's exchange policy and controls1
1. In order to ensure an adequate level of reserves  to maintain the parity with the U.S. dollar,
controls are in place on the capacity of residents and non-residents to buy, sell, and generally transact
in foreign exchange.  Commission charges of 0.125% and 1.75% apply when buying and selling the
dollar.  Higher commissions apply for the Canadian dollar, the euro, and the pound sterling.
(a) Invisible transactions and current transfers
2. Exchange control applies for payments to all countries  except the members of the
Organization of Eastern Caribbean States (OECS).  Exchange control is administered by the
Central Bank of Barbados, which delegates to authorized dealers the authority to approve normal
import payments.  Further authority is delegated to commercial banks in respect of current account
transactions up to BDS$250,000.  Foreign currency proceeds from invisibles must be sold toauthorized dealers.  Current account transactions and capital transactions with OECS members,
denominated in Eastern Caribbean dollars, are free of controls, except for transactions in debt issues
of OECS governments.
3. Subject to specific conditions under delegated authority, individuals and companies resident
in Barbados may maintain foreign currency accounts  with authorized dealers.  Certain receipts and
payments may be credited and debited to these accounts; others require the permission of the CBB.
Foreign exchange accounts held abroad are also subject to Central Bank permission.
4. Non-residents may under certain conditions maintain domestic currency accounts.  These
accounts may be credited with the proceeds from sales of foreign currencies, transfers from other
external accounts, bank interest, and payments by residents for which the CBB has given general or
specific permission.  The accounts may be debited for payments to residents of Barbados and for any
other payment covered by delegated authority to authorized dealers.  Other debits and any overdraftsrequire Central Bank approval.
5. Authorized dealers may release foreign exchange up to the equivalent of BDS$250,000 (c.i.f.)
for advance payments for imports into Barbados.  Other advance payments and amounts above the
quantitative limits require the prior approval of the CBB.  For freight and insurance, the limit is also
BDS$250,000 per transaction, including insurance payments and premiums.
6. Approval is also required for payments of profits and dividends above BDS$250,000, except
for companies from CARICOM countries listed on th e Barbados Stock Exchange, for which the limit
is BDS$3 million.  However, in September 2001, dividend payments to non-resident beneficiaries in
CARICOM countries were allowed remittance of the full amount due.
7. For personal payments, such as medical costs, studies abroad, and other expenses, approval
was required for amounts above certain limits.  In April 2001, however, commercial banks were
permitted to approve all transactions in respect of  payments outside of Barbados for education and
medical treatment.
(b) Capital transactions
8. Purchases of all securities abroad by residents require exchange control approval.  Earnings
on these securities must be repatriated and surrendered to an authorized dealer.  All credit operations,
as well as direct investments, also require exchange control approval.  Liquidation of proceeds of
                                                     
1 Based on information contained in IMF (2001), and information provided by the authorities.Barbados WT/TPR/S/101
Page 17
direct investments is permitted, provided that evidence documenting the validity of the remittance is
submitted, all liabilities related to the investment have been discharged, and the original investment
was registered with the CBB.
9. All real estate transactions require exchange control approval.  These include purchases
abroad by residents, and purchases and sales locally by non-residents.  Non-residents may acquire real
estate in Barbados for private purposes with foreign currency funds; local currency financing is notordinarily permitted.  Proceeds from the realization of such investment equivalent to the amount of
foreign currency brought in may be repatriated freely.  Capital sums realized in excess of this amount
may be repatriated on the basis of a predetermined rate of return on the original investment.  Amounts
in excess of the sum so derived are in principl e restricted to remittances of BDS$30,000 a year.
According to the authorities, in practice significant amounts in excess of the sum may be repatriated
over three years.
(c) Provisions specific to commercial banks and other credit institutions
10. Any borrowing abroad by authorized dealers to finance their domestic operations requires the
approval of the CBB.  Similarly, lending to non-residents (financial or commercial credits) requires
exchange control permission.