International credit ratings agency Fitch has delivered its latest assessment of Barbados’ fiscal consolidation, which is a positive one.
Fitch has forecasted that Barbados’ fiscal deficit will narrow to 1.4 per cent of gross domestic product (GDP) during the current 2023/24 fiscal year and 1.0 per cent in 2024/25 from an estimated 2.1 per cent of GDP in 2021/22.
The rantings agency anticipates that the Barbadian government will continue to prioritise fiscal consolidation under the framework of the Barbados Economic Recovery and Transformation (BERT) 2.0 plan, which was approved in October 2022, and a US$110 million, three-year Extended Fund Facility (EFF) agreed with the International Monetary Fund (IMF) in December 2022.
A primary goal of both the BERT 2.0 and IMF deal is to gradually increase Barbados’ primary budget surpluses over the coming years to reduce the country’s debt burden.
As a result, public spending increases will be limited in the coming years, while above-trend GDP growth will promote robust revenue growth.
In accordance with these developments, the government posted a primary surplus equal to 2.7 per cent of GDP in FY2022/23, surpassing its initial target of 2.0 per cent of GDP and compared to a 0.9 per cent deficit in FY2021/22.
Based on these factors, Fitch expects that this primary surplus will increase to 3.2 per cent and 4.0 per cent of GDP in 2023/24 and 2024/25, respectively.