Economy ‘lacking innovation boost’

Barbados must adopt more technological innovations if it wants to reverse lagging productivity and unlock more economic growth.

That is the assessment of Cloe Ortiz de Mendivil, Inter-American Development Bank (IDB) country economist for Barbados.

“In Barbados, total factor productivity (TFP) is at the same level as two decades ago, and a boost to innovation is necessary to increase growth prospects,” she says in the IDB Caribbean Country Department’s final Caribbean Economics Quarterly for 2024.

The publication, titled Innovation For Faster Economic Growth In The Caribbean: Are We There Yet?, examines the connection between technological innovation and economic growth in Barbados, The Bahamas, Guyana, Jamaica Suriname, and Trinidad and Tobago. These are the six IDB member countries covered by the bank’s Caribbean Country Department.

Downward trend

The report noted that “TFP, which explains technological progress in an economy, has been a key factor explaining the lack of growth in the region”.

“The Bahamas has been no exception . . .Bahamian TFP peaked in the 1990s and since then has been slowly decreasing. There is a shared downward trend with Barbados and Jamaica, meaning that a significant part of the region has suffered a decrease in TFP over the last 20 years,” the publication stated.

In the section on Barbados, de Mendivil concluded that “public policies designed to improve the provision of public services as well as to address the main challenges to engage in innovation . . . such as the skills mismatch in the labour force and access to finance – will help strengthen the enabling environment for innovation”.

“This will in turn increase productivity, attract investment, and ultimately boost growth in Barbados,” she said.

The economist explained that “innovation is a key driver of productivity, which in turn determines economic growth”.

Sluggish

“TFP refers to the portion of output that cannot be explained by the amount of inputs – typically labour and capital – used in producing such output,” she noted.

“Therefore, if a country is able to obtain higher outcomes using the same quantity of inputs, it is considered that it has increased its productivity.”

She observed that “since the global financial crisis of 2008, growth in Barbados has been sluggish and for the most part below the Caribbean average”.

“Real GDP averaged an annual decrease of 0.9 per cent between 2008

and 2018, and recurrent fiscal deficits led the country to an unsustainable accumulation of debt,” de Mendivil said.

“In 2018, Barbados embarked on a quest to return to macroeconomic stability by devising the Barbados Economic Recovery and Transformation Plan, which was supported by an International Monetary Fund programme.

Despite the unprecedented shock caused by the COVID-19 pandemic, the country is committed to the reform agenda, which is starting to bear fruit.”

She added: “Furthermore, the island’s economic activity revolves heavily around the tourism sector, so boosting innovation becomes central in two salient aspects. First, it can serve to upgrade the tourism offering and ensure that Barbados remains a top-notch destination that is competitive at attracting visitors.

Creative industries

“Second, it can help diversify the economy by developing other highvalue industries. The government of Barbados is keen to establish a life science industry, promote the creative industries, develop the blue economy, and accelerate innovation in the agriculture sector.”

On the question of whether or not businesses in Barbados innovate, de Mendivil referenced the 2024 Global Innovation Index (GII) published by the World Intellectual Property Organisation, which ranked Barbados 77 out of 133 countries.

This was above Jamaica (79) and Trinidad and Tobago (108), the only other Caribbean economies included in the index. The GII is comprised of multiple indicators grouped into innovation inputs and outputs that aim to capture innovation.

She compared this with the findings of the Innovation, Firm Performance, and Gender (IFPG) Survey conducted by the Compete Caribbean Partnership Facility in 2020.

This survey “found that, although more than half of the interviewed companies engage in green innovation, penetration of general and digital innovation remains limited, particularly compared to Caribbean averages.

She acknowledged that “Barbados has shown a strong commitment to fostering innovation with the establishment of the Ministry of Industry, Innovation, Science, and Technology”.

“Innovation is a key driver of productivity, which in turn determines economic growth”. (SC)

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