Link pay increases to productivity rather than using increased compensation to chase higher prices.
That was the advice recently from Central Bank of Barbados Governor Dr Kevin Greenidge when asked if the country’s improved economic performance meant there was space to give public sector workers a wage and salary increase.
“Economics should dictate that wages and salaries increases any country should be aligned with productivity. When you have strong employment growth, . . . one of the things to think about is lining up compensation with that. Compensation should reflect productivity, not inflation,” he said on Wednesday during the Central Bank’s third quarter press conference at the Courtney Blackman Grande Salle.
“I always said it even before I became governor, if you chase inflation, inflation is faster than a Usain Bolt, you ain’t catching it, you’re just pushing it. You focus on productivity growth, and therefore the more productive we are, the more we can compensate. That’s really the economic analysis
for it.”
The Central Bank’s January to September economic review, presented by Greenidge, stated that “wages and salaries grew by $15.9 million and also contributed to the expansion in current expenditure at end-September”.
The report said too, that inflation, the rate at which prices increase, “slowed for the 25th consecutive month on a year-on-year moving average basis, as imported costs fell”.
“The 12-month moving average inflation rate slowed to 0.5 per cent by August 2025, 1.8 percentage points lower than August 2024,” Greenidge said.
“The slower rate reflected smaller price increases for food, non-alcoholic beverages and health, along with continued reductions in clothing, transport, recreation, housing and utilities, and household furnishings.”
“Lower international oil and reduced freight costs over the year further contributed to the easing of domestic inflation. Higher demand for restaurant services pushed up the August point-to-point rate to 1.2 per cent, yet underlying inflation remained subdued.”
The Central Bank’s economic outlook is that domestic inflation will “remain low and stable”.
“The local inflation rate declined markedly during the first eight months of 2025, tilting the year’s outturn towards the low-end of the forecast range, at around one per cent,” he noted.
There were also external factors to consider, including “persistent geopolitical tensions in key oil-producing regions” and additional United States tariffs on its trading partners.
“Potential spikes in shipping costs and weather-related disruptions to local food production could also present temporary upward risks to the inflation outlook,” the Governor stated.
“All considered, the 12-month moving average inflation rate is likely to settle near the lower end of the forecast range between one and 2.5 per cent by year-end. This relatively low inflationary environment will help preserve domestic purchasing power and support confidence in the economy.”
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