The underperformance of the economy of Barbados has posed questions about the country’s overall growth prospects.
The geographical beauty of Barbados is underpinned by a relatively incorrupt and politically stable government. Despite this, however, the country’s economy has underperformed in recent years. Indeed, the 2008 financial crisis took its toll on the island nation, with the economy contracting by 4% in 2009. Since then, the economy has not grown at the expected 2.5% annual GDP growth rate and has even struggled to reach 1% GDP growth.
Its heavy reliance on the tourism sector has meant that there are calls from within the country for the government and its people to shift focus from tourism to other means of economic growth such as manufacturing, innovation, the embracement of technology, retail and investment in local businesses in order to avoid continued underperformance.
Tourism remains an unstable source of growth
Tourism is one of the main economic drivers in Barbados, with the majority of people coming for leisure. The difficulty at hand for Barbados is two-fold. Firstly, even though it frequently attracts many of the wealthiest tourists, this has not translated into strong, consistent growth.
This is due to the concentration of tourism spots on the Southern and Western coasts, which has meant that the development of the island tends to be quite varied.
The regions of Saint James and Saint Peter accommodate the wealthiest tourists. However, due to low population density and lack of urban areas, the investment from the tourism is not felt by the local population. Moreover, more populous regions such as Saint Philip receive less tourism and subsequently less investment.
Second, some of those tourists are now turning away from the country. This is due to the rise in luxury hotels in the country which are pricing out a number of visitors. This has been coupled with more taxes and fees on international visitors to the island. Tourists are now seeking alternative destinations.
Furthermore, this heavy reliance on the foreign services sector has been criticised as there is a lack of focus on the local infrastructure and economy.
Lack of confidence in government policy
There has been a lack of belief in the government’s economic policy. In fact, criticism has compared the government’s policy to that of a plantation economy.
The standard definition of a plantation economy is an economy reliant upon the exportation of agricultural products. The historical example is of European colonies exporting these products back to Europe.
The modern criticism of the government in this regard is that Barbados is now reliant on the exportation of tourism services to wealthy Western clients. This heavy reliance on tourism has not led to strong economic growth and thus there needs to be alternative options. Moreover, it seems as if the government treats wealth as a fixed entity. By this we mean that the government believes the amount of wealth that Barbados can create is a finite amount.
Therefore Barbados needs the foreigners who visit the country as they create the additional wealth apparently needed. However this view is too narrow and adversely impacts those in other sectors of the economy.
This has led to an erosion of confidence in the government which in turn has caused a lack of consumer spending. Moreover, local businesses have been reluctant to invest and generate jobs and subsequently growth.
Economic innovation continues to elude
The revenue that tourism brings into Barbados is simply not enough. There are calls for the country to show more economic innovation. This has included an effort to harvest the ‘blue’ economy, the coastal waters surrounding the island.
There has been an increased focus on entrepreneurship as one of the key drivers of the growth. Proponents say Barbados should take advantage of its relatively free economy to allow those with new ideas to create employment.
Moreover, there have been calls for the country to grasp technology in order to help local businesses. In order to be more competitive, Bajan companies must move on from traditional methods and learn to embrace the use of digital platforms to reach new customers and clients. Innovative ideas have been suggested such as the development of the sports sector which would generate revenue and create business networks.
The core of the sports industry is the employment of people. These people would offer a range of goods and services that would link different tertiary and secondary sectors together. Perhaps most importantly, it is a way of enabling those in poverty who have talents and an entrepreneurial mindset to rise up from their situation and contribute to the growth of Barbados.
Finally, the country should understand the potential it has as a producer of renewable energy, in particular solar energy. Bajan businesses should look to harness the benefits of the sustainable energy sector.
Barbados is not necessarily on the brink of an economic crisis but is at risk of consistent economic stagnation if the current trend of relying on tourism continues. It is the addition of innovation and the development of companies in other economic sectors that will drive the country’s growth in the future.
