Barbados outlook revised to positive by Fitch, affirms B+ rating

Investing.com -- Fitch Ratings has revised Barbados’s outlook to positive from stable while affirming its Long-Term Foreign-Currency Issuer Default Rating at ’B+’.

The positive outlook reflects expectations that continued fiscal discipline, including large primary surpluses, will improve fiscal metrics, particularly 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 shown steady fiscal improvement, with the deficit narrowing to 0.9% of GDP in the fiscal year ended March 2025, marking the third consecutive year of improvement. Strong revenue growth of 17% offset a temporary 13% increase in expenditures. Fitch expects the deficit to shrink further to 0.3% in FY25/26 before turning to a small surplus of 0.1% in FY26/27 - which would be the first surplus since at least 1990, excluding the 2019 debt restructuring year.

The country’s gross general government debt 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% by FY27/28, though this remains significantly 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 2025, 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, implementing structural reforms including the establishment of 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 tapering to 2.0% in the medium term.

The country has more than 20 major construction projects underway 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.

Factors that could lead to a rating upgrade include preservation of high primary surpluses leading to continued debt reduction, improved access to financing sources, and higher trend growth driven by economic reforms or stronger investment.

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