I.
COUNTRY CONTEXT AND RECENT ECONOMIC DEVELOPMENTS
1.1
Barbados is an upper-middle-income country with a high level of human development. However, it is also a small island developing state whose economy depends heavily on one sector (tourism), and thus it is highly vulnerable to external economic and environmental shocks. 1 In addition, the country’s competitiveness has been adversely affected in recent years because of higher accumulated inflation than in its main trading partners, in the context of a fixed exchange rate regime. Slow (albeit stable) institutions, high energy costs, and relatively expensive hospitality services have also had an adverse effect on competitiveness. Since 2001 the economy has been strongly affected by two external financial crises. The government’s efforts to stimulate the economy have had limited success and have also contributed to large current account and fiscal deficits, whose financing has resulted in a substantial accumulation of public debt. In addition, international reserves, which support the fixed exchange rate, have recently experienced a significant decline. (See Table A2.1 for a summary of selected macroeconomic indicators, and Figure A2.1 for a map of Barbados and the region.)
A.
General description of Barbados
1.2
In terms of per capita income, Barbados is the second-wealthiest borrowing member country of the Inter-American Development Bank (IDB, or Bank) and the one with the highest human development index. Barbados’ GDP per capita (adjusted for purchasing power parity) was above US$25,000 in 2012 (see Figures A2.2 and A2.3), the second-highest in the Latin America and Caribbean region after The Bahamas. 2 Because the country has made significant investments in the social sectors, it ranks 38th out of 186 nations in the 2013 United Nations Development Programme’s Human Development Index, and it compares favorably on a wide range of social and structural competitiveness indicators, including life expectancy3 and access to drinking water, electricity, and education. However, the country still faces significant development challenges.
1.3
Barbados has near-universal access to primary and secondary education, and it is working to improve education quality and relevance. Barbados has very high enrollment rates at the primary, secondary, and tertiary levels (95%, 88.9%, and 61.8%, respectively), 4 but there is a low degree of certification of formal secondary education
1
On the Bank’s Risk Management Index (RMI), Barbados rates 44.62 on a scale ranging from 0 to 100, with 0 being the highest risk and 100 the lowest. The index measures performance in risk management in terms of four public policy areas of disaster risk management (risk identification, risk reduction, disaster management, and governance and financial protection). According to the IMF, unadjusted nominal per capita GDP was US$16,150 in 2012. Life expectancy at birth was 77 years in 2012 (UNDP). The primary rate was measured in 2008, and the secondary and tertiary rates in 2011; the figures here represent net rates for primary and secondary education levels, and gross rate for the tertiary level (World Bank). There are gender disparities: boys are more likely to leave school early. Education is free up to the tertiary level and compulsory up to the secondary level.
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1