Briefing journalists on the bank’s third-quarter report, governor Dr Kevin Greenidge said real gross domestic product (GDP) had grown by an estimated 1.4 per cent, compared with 2.3 per cent over the same period in 2025.
Growth in the non-traded sector, which produces goods and services consumed domestically, offset weaker performance in the traded sectors, he said.
Domestic businesses kept the economy growing, while tourism and manufacturing shrank.
The non-traded sector grew by 1.8 per cent. Business services and wholesale and retail trade drove the growth, offsetting a slight fall in construction.
The traded sector, which earns foreign exchange, contracted by 0.6 per cent as tourism and manufacturing slowed.
The Central Bank said this left the economy more dependent on domestic activity, with growth coming from fewer industries at a difficult time for the global economy.
On the bread-and-butter tourism industry, the governor reported softening performance through the third quarter.
More visitors came to Barbados, but they stayed shorter periods, reducing tourism’s contribution to the economy.
Long-stay arrivals rose slightly, by 0.2 per cent, and cruise passengers calling here rose by 17.3 per cent, but because visitors spent fewer nights, tourism’s contribution fell by 1.2 per cent.
Hotels earned more from rooms as rates rose, but fewer rooms were occupied.
The Central Bank said the figures showed Barbados needed visitors to spend more, not just attract more.
The country’s international reserves took a slight hit, which Dr Greenidge insisted was not a concern at this time, even as foreign investment declined.
Central Bank Governor Dr Kevin Greenidge (File photo)
He said: “Barbados maintained substantial international reserves notwithstanding a decline in external financing inflows.”
The gross international reserves (GIR) stood at $2.8bn up to September, equivalent to 22.8 weeks of import cover and “comfortably above” the 12-week international benchmark, the central banker reported.
After rising during the first half, reserves declined by $309.6m in the third quarter to $217.8m below their level at the end of last year.
“Lower foreign investment and other financial inflows did not fully offset the economy’s external financing needs,” said Dr Greenidge.
He continued: “The reserve position continues to provide an important safeguard against external shocks, while highlighting the need to strengthen tourism earnings, investment inflows and external competitiveness.”
Joblessness edged up to 6.6 per cent in the second quarter, from 6.1 per cent a year earlier, which the Central Bank attributed to workforce growth outpacing employment gains.
But unemployment claims fell 6 per cent from January to September.
Inflation reached 1.5 per cent in July, up from 0.5 per cent a year earlier and 1.4 per cent in May 2026, reflecting higher prices for food, utilities and several household services.
The Central Bank said the Mottley administration’s measures to contain domestic fuel and electricity costs continued to pay off by cushioning the impact of rising global oil prices.
The governor also focused on prices, noting that while domestic inflation rose moderately on a 12-month moving-average basis during the first seven months of 2026, overall price pressures remained contained.
He said the 12-month moving-average inflation rate reached 1.5 per cent at the end of July, compared with 0.5 per cent a year earlier
Dr Greenidge said: “Higher prices for food and non-alcoholic beverages, housing and utilities, health, furnishings and household equipment, education, and restaurant services contributed to the increase. Slower price growth in communication and lower prices for alcoholic beverages and tobacco partly offset these pressures.”
He continued: “Point-to-point inflation eased after May, although it remained above its year-earlier level. The rate declined from two per cent in May to 1.6 per cent in June and 1.5 per cent in July, compared with one per cent in July 2025. Higher prices for food and non-alcoholic beverages, housing and utilities, transport, education and health continued to exert upward pressure. The 12-month moving-average rate, by contrast, still reflects increases recorded earlier in the year.
“Higher international oil prices and freight costs intensified external inflation pressures, while domestic inflation remained moderate. The 12-month moving-average inflation rate for international crude oil reached 13.6 per cent in September 2026, compared with a decline of 13.9 per cent a year earlier.”
The Middle East conflict and shipping disruptions around the Strait of Hormuz pushed oil prices higher, while substantial increases in international container freight prices raised the risk of higher import costs.
Dr Greenidge said: “International food prices remained 1.2 per cent lower on a 12-month moving-average basis, notwithstanding more recent increases. Government measures aimed at moderating domestic electricity and fuel costs continued, although electricity and gasoline prices rose by 8.6 per cent and 2.3 per cent, respectively, in July compared with the corresponding month of 2025.”
He noted that because domestic inflation data extend only to July, they do not yet capture any subsequent domestic price response to international oil and freight cost developments during August and September.
There was more encouraging news on the administration’s management of public finances, as the current account deficit narrowed, largely because higher corporate tax receipts boosted current transfer credits, Dr Greenidge said.
“During the first nine months of 2026, the deficit declined by $181.5m to $532.m. A $244.9m increase in net current transfers, associated with higher foreign currency corporate tax receipts, drove that result. Those inflows, together with a marginally narrower merchandise trade deficit, more than offset weaker services and income balances.”
But while this development was deemed “favourable”, it did not reflect a broad strengthening of export earnings, which Dr Greenidge said reinforced the importance of expanding “sustainable” foreign exchange inflows.
The government also maintained substantial fiscal and primary surpluses, even though spending again outpaced revenue gains in the first half of the fiscal year, which began in April.
The primary surplus reached $507.5m, exceeding the end-September programme floor by $137.5m, while the overall fiscal surplus totalled $150.1m.
Still, both surpluses narrowed compared with the corresponding period last fiscal year, as higher spending on goods and services, transfers, and capital projects more than offset higher revenue collections. Part of the increase in transfers reflected government measures to limit the impact of higher international fuel prices on households and businesses through reduced value-added tax (VAT) rates on household electricity and caps on fuel prices.
Corporate income tax receipts, including collections under the Qualified Domestic Minimum Top-up Tax, continued to prop up the government’s fiscal performance. The governor said the continued surpluses provided an important foundation for debt reduction and priority investment, although the timing and persistence of exceptional tax receipts warranted careful consideration.
Economic growth and control of government spending helped Barbados keep cutting its debt as a share of the economy, said the Central Bank.
“Gross public sector debt stood at approximately $15.3bn at end-September 2026, remaining $148.2m below the programme ceiling. The debt-to-GDP ratio declined to an estimated 93.6 per cent, from 94.8 per cent at the end of fiscal year 2025/26. Although the nominal debt stock increased modestly, growth in nominal GDP reduced the debt burden relative to the size of the economy, sustaining progress towards the medium-term debt objective.”
(EJ)
