Barbados Economic Outlook 2025: Insights from Professor Emeritus Michael Howard and Jeremy Stephen

Barbados faces a complex economic landscape in 2025, according to economist Professor Emeritus Michael Howard and former University of the West Indies (UWI) banking and finance lecturer Jeremy Stephen.

While both acknowledge the potential for growth, they are concerned about the nation’s debt management, reliance on external factors and the lack of clarity in Government’s financial strategies.

Stephen anticipates some growth, contingent on the timely execution of Government projects and stabilisation of international factors. Howard, on the other hand, remains wary of the reliance on borrowing and the lack of diversification in the economic base.

Stephen is forecasting 2025 as “a year of reckoning” for Barbados, influenced by domestic and international dynamics.

Domestically, he noted the Government’s increasing ambition in taking on debt to fund capital works projects. These initiatives, he added, once operational, could provide a short-term boost to economic growth.

Stephen underscored the importance of monitoring tourism spending, particularly from long-stay arrivals, to gauge economic health.

However, he warned that while unemployment might decline slightly, this might not translate into meaningful wage growth as a slowdown in inflation could occur, contingent on international stability. Stephen cautioned that disruptions in global markets could lead to import shortages and heightened costs of living, mirroring challenges faced during the COVID-19 pandemic.

On the international front, he pointed to geopolitical instability as a significant risk. With echoes of war and uncertainty surrounding global leadership changes, the economist said any resolution could set the stage for steadier growth. Nevertheless, he tempered expectations, suggesting that Barbados’ growth in 2025 will likely be modest, contingent on stabilising international conditions and effective Government project execution.

Former UWI banking and finance lecturer Jeremy Stephen. FILE

“Barring the emergence of a compelling industry to drive sustained growth, the Government’s ability to manage its increasing debt will be crucial,” Stephen asserted. “Timely completion of domestic projects could stimulate growth, but the sustainability of this growth remains uncertain.”

Howard echoed these concerns, focusing on Barbados’ debt levels and the potential long-term implications. Drawing parallels to Jamaica’s prolonged engagement with the International Monetary Fund (IMF) during the 1970s, the retired UWI lecturer warned that Barbados risks falling into a similar debt trap, reliant on borrowing to service existing obligations.

“Barbados does not earn sufficient foreign exchange and continues to depend on borrowed reserves,” he said. “This creates a precarious situation where the nation’s financial stability hinges on continuous borrowing, without clear returns on investment.”

Howard expressed apprehension about the lack of transparency regarding the allocation and impact of Government loans. While acknowledging increased activity in construction and tourism development, he questioned whether these efforts were effectively addressing the socio-economic challenges faced by ordinary Barbadians.

“Food prices, health care costs and other essential services remain high, and many Barbadians feel the strain of these pressures. There is also limited communication from the Government on its economic strategy, leaving citizens uncertain about the country’s direction,” he said.

Both economists highlighted the role of the IMF in Barbados’ economic trajectory. Howard noted that while the international lending institution has softened its approach in recent years, its primary mandate remains addressing balance of payments crises rather than driving economic development.

He said loans provided by the IMF are intended to create fiscal space and improve financial management, rather than to fund unrestricted spending.

“Barbados must understand the IMF’s role and align its strategies accordingly,” Howard said.

He also called for greater public disclosure regarding the reform of state-owned enterprises, including potential job losses and operational changes.