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Investing.com -- Fitch Ratings has affirmed Barbados’s Long-Term Foreign-Currency Issuer Default Rating at ’B+’ and revised the outlook to positive from stable.
The improved outlook reflects expectations that continued fiscal discipline, including large primary surpluses, will enhance fiscal metrics and reduce the country’s high debt-to-GDP ratio. Fitch anticipates that ongoing investment projects will support economic growth and further public debt reduction.
Barbados has maintained fiscal consolidation efforts, with the fiscal deficit improving for the third consecutive year to 0.9% of GDP in the fiscal year ended March 2025. Strong revenue growth of 17% offset a temporary 13% increase in expenditure. The deficit is expected to narrow to 0.3% in FY25/26 before turning to a small surplus of 0.1% in FY26/27 – which would mark the first surplus since at least 1990, excluding the 2019 debt restructuring year.
The country’s debt burden has declined from a peak of 179% of GDP in March 2018 and a post-restructuring and post-pandemic peak of 118% in FY21/22 to a forecast 100.1% in FY25/26. Fitch projects debt will fall to 90% of GDP by FY27/28, though this remains substantially higher than the ’B’-median of around 50%.
Barbados’s financing flexibility has improved following its successful return to global capital markets with a $500 million benchmark deal in June 2025. The government also launched a third round of BOSS+ bonds worth BBD200 million in June after selling more than BBD100 million in BOSS+ between January 2024 and June 2025.
The country successfully completed its IMF and BERT 2.0 programs this year, which included establishing a fiscal council, a fiscal risk unit, and a procedural fiscal rule. Barbados aims to continue reforms through a pending BERT 3.0 program focused on boosting growth potential.
Economic growth slowed to an estimated 2.5% year-over-year in the first half of 2025, down from 4.0% in 2024, but remains above Barbados’s historical average of 0.5%. Fitch expects growth to reach 2.7% in 2025 before moderating to 2.0% in the medium term.
The country’s investment pipeline includes more than 20 major construction projects totaling over BBD3.2 billion ($1.6 billion or 19.8% of GDP), though infrastructure limitations and capacity constraints may limit growth potential.
Despite high structural current account deficits of around 5% of GDP, international reserves reached an all-time high of $1.9 billion in June 2025. Fitch expects these to moderate to around $1.7 billion by year-end, representing 6.0 months of current external payments compared to the ’B’ median of 4.3 months.
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