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Barbados - Economy

A history marred by slavery and the exploitation of people for economic gain based solely on their racial character has helped to cement in post-colonial Barbados a deep reverence for the notion of economic enfranchisement and equal opportunity.

From the moment of independence from Great Britain, Barbados has been committed to the financial empowerment of those elements of its population traditionally excluded from enjoying the benefits of economic activity and financial prosperity. Successive government policies have been aimed at expanding the middle class in Barbados and creating the sorts of educational opportunities that allow individuals to aspire to ownership, entrepreneurship and the creation of real wealth.

Barbados has an exceptionally high quality of life rating for a developing country. The economy, formerly a sugar monoculture, was developed over three decades to achieve a balance of growth and social development, and diversified into three main sectors: services, light industry and sugar. An offshore financial services sector, launched in 1985, has become the countrys second biggest source of foreign exchange after tourism.

Since independence, Barbados has transformed itself from a low-income economy dependent upon sugar production into an upper-middle-income economy based on tourism. Barbados is now one of the most prosperous countries in the western hemisphere outside of the United States and Canada. The economy went into a deep recession in 1990 after 3 years of steady decline brought on by fundamental macroeconomic imbalances. After a painful readjustment process, the economy began to grow again in 1993. Growth rates averaged between 3%-5% since then until 2001, when the economy contracted 2.8% in the wake of the September 11 terrorist attacks and the global drop-off in tourism. Growth picked up again in 2004 and 2005, and the economy grew by 3.8% in 2006.

The Barbadian economy continues its recovery on the back of stronger tourism performance, but improving public finances remains a critical challenge. Economic growth in 2016 was estimated to have been 1.6 percent and to have accelerated in the first quarter of 2017 to 2 percent. The stronger economic performance supported a reduction in the unemployment rate to 9.7 percent in 2016 from 11.3 percent in 2015. Inflation started to pick up in the second half of 2016 after deflation in 2015, and on a point-to-point basis reached 3.2 percent by end-December 2016 mainly due to higher food prices.

Tourism drives the economy in Barbados, but offshore banking and financial services have become an increasingly important source of foreign exchange and economic growth. The sugar industry, once dominant, now makes up less than 1% of GDP and employs only around 500 people. The labor force totaled 142,000 persons at the end of 2006. The average rate of unemployment during the last quarter of 2006 was estimated at 7.6%. The current account deficit expanded to 12.5% of GDP, and government debt rose above 80% of GDP in 2006.

Barbados hosted the final matches of the Cricket World Cup in 2007, and much of the country's investment during 2006 and the beginning of 2007 was directed toward accommodating the expected influx of visitors. As a result of these preparations, growth was registered in all sectors, especially transportation, communications, construction, and utilities. The government and private sector are both working to prepare the country for the Caribbean Community (CARICOM) Single Market and Economy (CSME)--a European Union-style single market.

With a small and open economy Barbados lacks scope for further diversification and remains vulnerable to economic downturn in its trade partners. After 2000 the economy went into recession due to the downturn in the USA and Europe and resulting falls in tourist numbers. It picked up in 2003 and grew steadily until 2008 when the world economic downturn again caused a sharp fall in tourism and pushed the economy into reverse. After a sharp recession in 2009 when GDP fell by 4.1 per cent, the economy hardly grew at all in 201014.

Barbados is currently ranked 117th out of 190 countries in the World Bank Doing Business report 2017 (April 2017 rankings). The report highlights positive changes in starting a business but notes difficulties in getting credit, getting electricity, dealing with construction permits and trading across borders.

The services sector holds the largest potential for growth, especially in the areas of international financial services, tourism, information technology, education, health, and cultural services. In agriculture, the gradual decline of the sugar industry opened up land for other agricultural uses, and investment opportunities exist in the areas of agro-processing, alternative and renewable energy, and hydroponics. In the financial services sector, the government improved its regulatory oversight and the industry is thriving under better regulatory standards designed to prevent money laundering and tax evasion.

Wages in Barbados are some of the highest in the Caribbean. Minimum wages are administratively established for only a few categories of workers, and enforced by law by the Ministry of Labors Labor Department. The minimum wage for shop assistants is USD $3.13 per hour. The Ministry of Labor recommended that companies recognize this as the de facto minimum wage, though most employees earn more than this.

The major unions recognize the advantages accruing to Barbados from foreign investment and foreign expertise and are generally flexible and accommodating in their dealings with employers. However, local labor leadership is sensitive when it perceives a lack of respect for Barbadian laws and customs by large, visible foreign employers. It is generally cooperative with management in unionized shops.

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