Barbados’ latest economic gains are being driven by seasonal industries such as tourism and construction, and may not be sustainable without greater diversification, a prominent economist warned.
While praising the 2.7 per cent growth of the economy announced on Wednesday by the Central Bank of Barbados, economist Dr Antonio Alleyne cautioned that the gains were being powered by sectors lacking long-term sustainability.
The report by the Central Bank Governor was generally sound, said the economist, noting that the lowered unemployment rate of 6.1 per cent was largely the result of a construction boom and a thriving tourism industry, both of which he described as seasonal and unsustainable.
“The report paints what we call a robust recovery,” Dr Alleyne said. “Everything looks positive, GDP growth of 2.7 per cent, unemployment down, reserves up, surpluses recorded, but much of it is being fuelled by tourism and construction. We’re building hotels on top of hotels.”
Dr Alleyne acknowledged the governor’s optimism, but cautioned that the economy’s performance still depends too heavily on tourism, with agriculture and manufacturing contributing minimally to overall output. He added that although there has been some agricultural growth, it is “not at the stage yet where we can say it’s a real engine for growth”.
He noted that diversification remains uncertain. “If we are pushing the notion of diversification, we must see other areas helping to boost the economy apart from tourism.”
The economist also questioned the quality and duration of jobs being created in construction, describing them as low-end and short-term, and pointed out that this boom is itself linked to tourism investments. “When tourism does well, construction does well. But when tourism slows, both decline. So is that really diversification?” he asked.
He welcomed the Central Bank’s plans to introduce a national electronic payment system, BIMPay, calling it a major step forward in improving the efficiency, safety and accessibility of financial transactions. “It could greatly boost the financial services and commercial sectors,” he said.
Dr Alleyne expressed concern about Barbados’ high debt levels, noting that while the debt-to-GDP ratio stands around 100 per cent, the debt service ratio – the amount spent repaying debt – has risen sharply: “This year, for every dollar in revenue we earn, about 76 cents goes towards paying debt. That limits government’s ability to invest in critical areas like climate change, manufacturing and diversification.”
He also pointed to a widening trade gap, driven by high imports linked to tourism demand and a seven per cent decline in exports: “We have a large number of imports, which is probably as a result of the same tourism sector. Let’s be honest, as we are not producing… we’re importing large numbers and exports are relatively short. So we have what we call a conundrum.
“We have a structural imbalance. Tourism drives growth, but it also fuels imports. Even with strong reserves, money is flowing out because we’re not producing enough locally.”
Dr Alleyne also raised concerns about declining productivity, noting that while unemployment has fallen, there is little evidence of improved efficiency or higher output per worker. “Growth measured in dollars is one thing, but productivity tells the real story.”
He further cautioned that the heavy focus on tourism-related development, including hotel and Airbnb construction, is driving up housing costs and making it harder for locals to access affordable accommodation.
“When the economy tends to focus so heavily on the tourism sector, whether it’s hotels, whether it’s private homes, you can see a lot of the Airbnbs… are increasing tremendously and the cost to access or to utilise these facilities is actually quite high, which means it kind of removes the possibility for locals to make use of some of these aspects as well, so in other words, the cost of living essentially goes up.”
Despite these concerns, Dr Alleyne said he remains optimistic about Barbados’ economic potential, provided that policies are directed towards building resilience through diversification and productivity gains.
“The report looks sound, and the economy is showing recovery,” he said. “But the challenges, debt, dependence on tourism and low productivity must be addressed if we want lasting growth.”
louriannegraham@barbadostoday.bb
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