A University of the West Indies economist is cautioning that Barbados’ modest economic growth masks deeper vulnerabilities, warning that reliance on tourism, temporary tax gains and foreign borrowing could leave the country exposed as global pressures intensify.
While Barbados has managed to weather mounting global economic headwinds, it cannot afford to become complacent, according Dr Antonio Alleyne, who is urging policymakers to look beyond encouraging headline figures and confront deeper structural challenges.
His comments came after the Central Bank of Barbados reported on Thursday that the economy grew by 1.4 per cent during the first half of the year, down from two per cent during the corresponding period last year.
The governor, Dr Kevin Greenidge, attributed the slowdown largely to worsening global conditions, including persistent inflation, rising interest rates and geopolitical conflicts, while stressing that Barbados had remained resilient, with healthy foreign reserves and continued economic expansion.
But Dr Alleyne questioned whether the country was still benefiting from the lagging effects of the government’s short-term measures “to buffer us from the external economy, or whether we are actually still overly reliant on a few sectors”.
Tourism, he argued, remains a key area of concern despite signs of resilience.
While visitor receipts have edged higher, Dr Alleyne noted that the figures require closer examination because they are being influenced by higher accommodation costs rather than stronger visitor spending.
“Tourist arrivals are up, and receipts are up marginally, but what was not mentioned is that the cost per room has gone up,” he said. “We have increased arrivals, but persons are staying fewer days, and the cost of staying is higher. The question is whether that is a sustainable approach, particularly in the environment we have now.”
The UWI economist also warned that Barbados should not rely too heavily on the revenue boost generated by the global minimum top-up corporate tax, which has helped improve the government’s fiscal position.
“One of the most critical things in this debt reduction is the fact that receipts from the global minimum top-up tax are up. When that normalises, what does that mean for our business economy? The excess revenue has led to an expedited reduction in our deficit. What happens when this top-up tax normalises?”
He also questioned whether Barbados’ growing reliance on climate financing could create new fiscal pressures in the years ahead.
“We have to be careful whether this is actually aligning with our climate initiatives or whether it is something that is eventually going to put a strain on the financial position of the economy. You still have to pay back these loans. We have to really question ourselves as to whether that is sustainable.”
Although acknowledging that the country’s economic performance has remained relatively stable, he said inflation continues to threaten households and businesses, particularly because of Barbados’ dependence on imported fuel.
“We still have inflation to deal with. Our heavy dependence on oil, combined with the turmoil in the international community, means we may see more pressure from higher prices.”
He warned that rising fuel costs inevitably spill over into higher prices for food, transport and utilities, placing additional pressure on consumers.
“A significant portion of that inflation comes from the fuel sector. We must find a way to cushion that for the domestic side.”
Despite his concerns, Dr Alleyne said Barbados deserves credit for remaining resilient in a difficult global environment, but cautioned that the toughest challenges may still lie ahead.
“I think everybody should cheer the fact that we have held our own thus far,” he said. “But bear in mind there’s no greener pastures after this point. I anticipate larger impacts from the global economy, particularly in oil imports, and the knock-on effects from a domestic perspective.”
(SB)
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