Barbados Economy - Foreign Trade and Balance of Payments
Sources: The Library of Congress Country Studies
Barbados had expected trade to achieve its goal of export-led economic growth by the mid-1980s. By 1985, however, Barbados had experienced significant declines in all sectors that traditionally accounted for the majority of its foreign exchange earnings. The poor performance was a result of constricting regional demand for Barbadian goods and tighter trade restrictions in the Caricom market.
Barbados' foreign exchange earnings were derived from numerous goods and services. Sugar and molasses accounted for nearly 80 percent of agricultural exports in 1985 and contributed 10 percent of total merchandise exports. This sector, however, accounted for only 4 percent of total foreign exchange earnings and has continued to decline in importance since the early 1960s.
The manufacturing sector provided Barbados with 85 percent of the total value of merchandise exports and 30 percent of total foreign exchange. In 1985 electronic components represented 60 percent of total manufactured goods; secondary exports included clothing, chemicals, and rum. Tourism was the greatest foreign exchange earner in 1985; receipts totaled 38 percent of exported goods and services.
Approximately 23 percent of Barbadian exports went to other Caricom countries in 1985. Guyana and Trinidad and Tobago absorbed 68 percent of regional exports, whereas St. Lucia, Jamaica, Grenada, and St. Vincent and the Grenadines together accounted for 21 percent. The other 11 percent went to numerous other regional trading partners. Preliminary figures for 1986, however, suggested that Caricom trade would fall significantly, perhaps by as much as 20 percent. The United States purchased most of Barbados' electronic components and accounted for 18.4 percent of total merchandise exports. Britain and Canada constituted 5.8 percent and 1.4 percent of the Barbadian export market, respectively; the remainder was sent to numerous other countries.
Overall, exports declined 10.1 percent in 1985 because of decreased demand for all items. Electronic components, sugar, and clothing fell 10 percent, 12.2 percent, and 30.6 percent, respectively. Barbados did not expect a significant change in market conditions in the near future and was developing a market strategy that focused on extraregional economies to absorb sugar and manufactured products.
In addition to declining demand for Barbadian exports, the island's foreign exchange position was also negatively affected by currency devaluations in Trinidad and Tobago and Jamaica, as well as by large wage increases given to workers in the Barbadian tourist and manufacturing sectors. These two problems had a combined effect of lowering the country's competitive position in the region. Because of wage increases and the relatively expensive Barbadian dollar, goods and services originating in Barbados were more expensive than those of the country's primary competitors.
In 1985 Barbados' primary imports were capital goods, food and beverages, fuels and chemicals, and miscellaneous durable goods; these represented 21.7, 15.3, 10, and 5 percent, respectively, of total imports. Other consumer and intermediate goods included textiles, animal feeds, and other unspecified goods. The United States provided 41 percent of total imports and was the trading partner causing the single largest deficit. It was followed by Caricom countries, which shipped 14.7 percent of total imports; the remaining 29.2 percent came from numerous other countries. Britain and Canada supplied 9.1 percent and 5.1 percent, respectively. Trinidad and Tobago furnished 70 percent of all Caricom goods imported by Barbados, and Jamaica supplied 21 percent; the remaining 9 percent represented less significant trade relationships with other regional partners.
Barbados' balance of payments position was relatively healthy at the close of 1985, in spite of trading problems. Exports of goods and services had exceeded imports, providing a current account surplus of US$40.3 million. The surplus occurred when there was a fall in both absolute exports and imports; however, strong tourist receipts narrowed the trade deficit.
The capital account experienced heavy outlays to repay private loans, and much of this debt was essentially replaced by public borrowing. There was a capital account surplus of US$46 million in 1985. When added to the current account and adjusted for errors and omissions, the overall balance of payments was US$22.4 million.
Informed observers suggested that Barbados might experience only slight growth in the late 1980s because of declining manufacturing trade. An increase in tourist receipts and an improved competitive position were expected to help the country adjust to a decline in foreign earnings, but it appeared that increased borrowing would be needed for at least the five-year economic planning period beginning in 1988. Such borrowing would cause Barbados' 1985 debt service ratio of 8 percent of exports to double by the early 1990s. Furthermore, it was expected that a deficit in the current account in later years would cause the overall balance of payments to become negative as well. The need to purchase more intermediate goods and increase borrowing to maintain development goals, as well as greater regional competition in the tourism and manufacturing markets, was the most likely reason for this adjustment.
Data as of November 1987
NOTE: The information regarding Barbados on this page is re-published from The Library of Congress Country Studies and the CIA World Factbook. No claims are made regarding the accuracy of Barbados Foreign Trade and Balance of Payments information contained here. All suggestions for corrections of any errors about Barbados Foreign Trade and Balance of Payments should be addressed to the Library of Congress and the CIA.