Barbadian Current Account Deficit Will Narrow From 2021 Highs In 2022 And 2023

• Barbados’ current account deficit is forecasted to narrow to 6.6% of GDP in 2022 and 6.9% in 2023, from 11.2% in 2021. This is a negative revision from the previous 3.4% forecast, due to recent government data revisions.
• It is still expected that the recovering tourism sector will support a sharp rebound in services exports, though sustained demand for goods imports will keep the overall current account in deficit. Consequently, the deficit is expected to average 6.8% of GDP from 2022-2026, slightly larger than the historical average of 4.1% from 2015-2019.
• The services trade surplus is expected to widen to US$1.0Bn in 2022, from US$769.0Mn in 2021. The slow but continued recovery of the tourism sector will underpin the wider services trade surplus in 2022. Compared to tourist arrivals in 2019, arrivals peaked in March 2022 at 64% of 2019 levels, but have come down slightly in subsequent months.
• Remittance inflows have hit records in 2022 across most Caribbean countries, due to the strength of the US labour market and Fitch expects inflows to Barbados will remain high through 2022. So far through Q2 2022, incoming transfers have increased by 33.0% from the same period in 2021, which is further anticipated to widen the secondary income surplus to US$76.0Mn, from US$33.1Mn in 2021. 
• Fitch’s global team is currently forecasting a worldwide slowdown which will impact growth in the US and other developed markets that are a major source of Barbadian tourist arrivals and remittances. That said, falling commodity prices will bring import growth down to 9.0%, compared to 17.0% in 2022, limiting the overall size of the current account deficit.

(Source: Fitch Solutions)