The Central Bank of Barbados’ latest economic review has painted a rosy picture of the nation’s financial health, a leading academic has noted but he expressed “major concerns” about rising inequality and labour market trends.
“The average man is not feeling the growth and strong economic performance,” said Professor C. Justin Robinson, Pro Vice-Chancellor of the University of the West Indies Five Islands Campus. He described the report as “stellar” and “one of the more positive reports in recent years” but also highlighted several areas of concern.
Professor Robinson told Barbados TODAY: “My major concerns alongside this otherwise stellar report are the possibility of rising inequality and the developments in the labour market where the labour force . . . appears to be approaching historic lows and requires further research and attention.”
Real GDP growth reached 4.5 per cent in the first half of this year, up from 3.9 per cent in the same period last year. The unemployment rate fell from 8.9 per cent to 6.9 per cent, while inflation dropped from 5.9 per cent to 2.7 per cent year-on-year.
Foreign exchange reserves increased to $3.2 billion, up from $3.1 billion in 2023. The primary balance improved from a surplus of 1.2 per cent of GDP to 3.5 per cent, and the debt-to-GDP ratio decreased from 117.5 per cent to 105.3 per cent.
The economist noted an unprecedented disconnect between the reported economic performance and public perception.
“Over the years, I have never experienced what appears to be such a major ‘disconnect’ between the reported performance of the economy and the perception among sections of the general public as how well the economy is performing,” he said.
Professor Robinson suggested a trio of factors may be to blame for this experience gap: inflation, government austerity and inequality.
“For many Barbadians, this may mean that they are not experiencing an improvement in their spending power and, in some cases, may even be facing a decline,” he contended.
He explained that inflation measures the average price increase and that a falling inflation rate does not necessarily indicate a decrease in prices but rather a slower rate of price increase. “This means that even if prices are rising, they might not rise as fast as they were before, which could be why some people feel like they’re not getting ahead.”
Another factor he cited for the apparent disconnect is the combination of higher prices and the austerity measures introduced over the years, including higher property tax rates for some.
“Solid waste tax, the debt restructuring exercise, higher fuel prices, foreign exchange tax, and VAT on Amazon purchases, may mean that persons in Barbados on fixed or relatively fixed incomes are facing a structural decrease in their spending and hence not ‘feeling’ the improved economy’s performance,” the professor of finance observed.
He insisted that while necessary for the country’s economic stability, these measures have strained the average person’s budget, making it difficult for them to see the benefits of overall economic growth.
“It may be possible that there is an increase in inequality in Barbados, where a smaller section of the population is benefitting from economic growth than historically,” Professor Robinson gave as a third reason for the perceived disconnect.
The central bank governor’s report also reflected that the financial sector showed increased strength and resilience, with the capital adequacy ratio improving from 18.6 per cent to 20.8 per cent and non-performing loans at banks falling from 5 per cent to 4.7 per cent.
It pointed to an economy continuing its strong performance with 13 consecutive quarters of positive real GDP growth and improvements across the major economic metrics.
emmanueljoseph@barbadostoday.bb
