IMF Executive Board Concludes 2008 Article IV Consultation with Barbados

Barbados' economy benefits from strong institutions and social and political stability. The country has one of the highest per capita incomes in the region, compares favorably on a wide range of social, political, and competitiveness indicators, and enjoys an investment grade rating. These factors have helped Barbados become a prime location for high-end tourism and offshore financial services. As a small and open economy, however, Barbados lacks scope for diversification and is vulnerable to external shocks. The country's trade openness and dependence on tourism and a few other services expose it to geopolitical tensions and cyclical swings. Moreover, while the 33-year peg to the U.S. dollar enjoys strong support and credibility, vulnerabilities arise from high public debt and a sizeable current account deficit.