A senior Government economist has identified these as among the main reasons the Barbados economy is not growing.
But Economic Affairs Division Chief Economist, Derek Gibbs, also believed a significant part of the problem was that the economy “remains narrow with limited export potential”.
He made the observations in a study called Examining The Constraints To Economic Growth In Barbados: A Growth Diagnostic Approach and said the challenges identified and other shortcomings warranted a major economic restructuring, including a greater focus on renewable energy and culture.
“Barbados is a country highly dependent on the export of services and investments. Tourism, the main services sector, which is a significant contributor to growth, is highly impacted by external shocks that can result in increased volatility,” the economist concluded in his research and policy working paper.
“On top of this, the Barbados economy remains narrow with limited export potential and hence in need of re-structuring with a focus on broadening export-driven growth. Much of the constraints lie in the areas of business facilitation, high labour and production cost, and implementation of policies and programmes for various reasons. As a result, growth has traditionally been low, while the level of productivity and competitiveness has been limited.
“Notwithstanding these issues, Barbados’ high level of political and economic stability and high education and health services makes it an attractive destination for investment and hence all effort should be taken to build on these attributes,” he added.
Gibbs said the current focus on renewable energy and culture as emerging growth-creating sectors was important and that any related strategy “must be to see how best resources can be used to obtained the main objective that being growth”.
“It may also mean examining the experience of other countries like Mauritius to determine what lessons could be learnt,” he suggested.
The researcher said determining if Barbados had an economic growth problem was not a straight forward issue, pointing out that “economic growth has been somewhat volatile and low for most periods with only a few years when it stood four per cent and over”.
He also said that “given the importance of foreign reserves to growth it is a matter of concern that the non-traded foreign exchange using sectors, (mainly wholesale and retail, and business services) have been the major components of real GDP”.
“While data was lacking the observation was that the growth in productivity seems not to have any significant impact on economic growth. This raises the question as to whether the level of productivity is high enough, which may not be the case particularly between 2008 and 2010. Maybe this could partially explain the low or insignificant growth rates during this period,” Gibbs stated.
Other negatively impacting factors identified were business facilitation, energy costs, taxation, and financing. (SC)