Economists raise questions about over-reliance on sector

Barbados’ economic stability is dangerously over-reliant on tourism and could quickly unravel if that sector falters, economist Professor Troy Lorde has warned.

Reacting to the Central Bank of Barbados’ first quarter review last week, he said the headline figures, while positive, tell only part of the story, pointing out that growth remained heavily concentrated in a single sector.

His colleague at the University of the West Indies Cave Hill, Professor Don Marshall, described the recent performance as a “remarkable stabilisation achievement”, but cautioned that the country had yet to achieve meaningful economic transformation.

Expansion

Central Bank Governor Dr The Most Honourable Kevin Greenidge on Wednesday reported that the economy grew by 1.7 per cent in the first quarter of 2026, resulting in 20 consecutive quarters of expansion, with inflation at 1.1 per cent and unemployment at 7.2 per cent.

Tourism again drove much of that performance, supported by increases in both stay-over and cruise arrivals, along with continued activity in construction and services.

Lorde said the Central Bank’s latest report masked a deeper structural imbalance in the economy.

“The rest of the economy is lagging . . . . Tourism is essentially the economy right now,” he said, noting that while the sector expanded by more than three per cent, overall growth was just 1.7 per cent, implying that other sectors grew at roughly one per cent or less.

“That tells you the structure is still very dependent and very imbalanced. If tourism is not doing well, that stability narrative would disappear.”

He added: “That 1.7 per cent is a headline figure. It doesn’t tell the story.”

He explained that Barbados’ dependence on tourism left it highly exposed to external shocks, particularly as leisure travel was discretionary and driven by global economic conditions.

“When people don’t feel confident about their finances, they don’t travel. That is the nature of tourism, so we need other sectors that can function when tourism is not firing.”

Marshall, head of the Sir Arthur Lewis Institute of Social and Economic Studies, said while the combination of steady growth, low inflation, falling unemployment and improved fiscal balances reflected sound economic management, the underlying structure of the economy remained largely unchanged.

“This is not diversification in any meaningful, developmental sense. It is sectoral deepening within an already narrow structure,” he said, pointing out that growth continued to be concentrated in tourism, construction and services, with investment largely tied to real estate and tourism-related activity.

External demand

He said Barbados remained locked into a model that depends on external demand, one that “exports experiences and imports necessities”.

Both economists also raised concerns about the disconnect between official data and the realities facing households.

Lorde questioned whether the low inflation rate of 1.1 per cent reflected actual cost-of-living pressures, arguing that increases in essential goods and services were often masked within broader price indices.

“Inflation is made up of a number of items . . . but the things people have to buy – food, rent, transportation – did those only go up by one per cent? Probably not,” he said.

Marshall noted that rising costs in key areas such as transport, health care and education were being felt disproportionately, even as overall inflation remained subdued.

“Low aggregate inflation masks the reality that cost-ofliving pressures are concentrated precisely where households feel them most,” he said.

On the fiscal side, Marshall acknowledged Government’s success in restoring discipline, with a strong primary surplus and declining debt levels, but questioned whether those gains were being used to fundamentally reshape the economy.

“This raises a crucial question: what kind of investment is being prioritised, and whom does it serve?” he asked, stressing that fiscal prudence without structural change risks reinforcing existing economic dependencies.

Lorde took issue with the continued reliance on tax concessions and incentives to attract investment, adding that such measures could undermine Government’s ability to fund essential services.

“If your model can only succeed on the back of concessions and reduced taxes, then you’re putting pressure on the Government to provide education, health care and everything else with less revenue,” he said.

Both agreed that diversification remained the central challenge, with Lorde pointing out that responsibility must be shared between Government and the private sector.

“The Government has to send signals, but investors and entrepreneurs also have to take risks,” he said.

Marshall said Barbados must move beyond a narrow focus on macroeconomic stability and pursue a model centred on productivity, resilience and economic sovereignty.

“Stabilisation was necessary; it was not sufficient,” he said, warning that without meaningful change, the country risks remaining in a “low-diversification, high-debt equilibrium”. (CLM)

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