I hold absolutely nothing against the Ivy—a very famous urban neighbourhood in Barbados. This past week, the memory of a day trip in 2004 with my late maternal grandmother weighed heavily on my mind. The reason was, ironically, due to the public discourse surrounding the release of the Central Bank’s Review of Barbados’ Economy, January–June 2025. It has been quite a few years since I listened to a governor’s press conference on the release of this document. These days, any analysis I do begins with hearing the public’s reaction to the Governor’s media presentation. I tend to read the document afterwards, drawing my own insights against those that are peddled in public. In fact, this is why I haven’t given an interview on the document in quite some time.
The first step of my analysis this time threw me for a loop. Interestingly, my issue was less with the report itself and more with the public’s reaction to the headlines. Truthfully, the report does not say much of note, other than to confirm that the country, in the short run, has “stabilised”. From the Governor’s presentation, the public learned that we have low interest rates, stable default risk for loans to residents and the private sector, a generally low-risk financial market for consumer credit and mortgages, and falling public debt as a percentage of GDP, even though GDP growth was lower than the same period last year.
All is supposedly well because construction—a highly labour-intensive sector and the government’s favoured tool for driving short-term growth—leads the charge, alongside the ever-touted tourism industry. I almost forgot to mention that the unemployment rate continues to fall, even in the face of persistent geopolitical tensions. By now, readers know I am very much against using that statistic to convey any real sense of health or malaise in our job market. The report also sang the praises of the agricultural sector and the steady climb in its contribution to the economy.
However, the headlines zoned in on the spectre of inflation. This is not something we can control much locally, even if the government concocts policies against alleged price gouging on the island. Inflation is mostly imported, after all, and since most of our GDP is driven by activities aimed at those living and working on the island, it stands to reason that, with a continually weakening manufacturing sector, our industrial inputs will likely continue to come from abroad.
The headlines also noted the tepid GDP growth. Since I did not hear the presentation myself, I cannot say whether economic growth of 2.5 percent for the year so far should be “celebrated”, especially when inflation is just 0.5 percent for the same period. It suggests a slowdown, even when compared to historical periods, aside from the extraordinary circumstances of the COVID-19 pandemic. I see softening. I expected it, because there is no real execution of a sustainable growth strategy in Barbados. You cannot expect two diametrically opposed things to be true at the same time. For clarity, I draw on my grandmother, who used to say, “Two things closely opposed cannot be true at the same time.”
I almost forgot to tell you about my day with the old girl for a moment—I got carried away. Normally, I like to put my anecdotes up front, so I apologise for this departure. I fancied myself a bit of a music producer during my time as a student at UWI. I was into making rap beats, which brought me into some circles locally that I still respect. On the day in question, I was following my usual weekend routine with Ma when I received a call from a friend in the Ivy, asking me to come and listen to some tracks he was working on. I did not have much time to drop my salt-of-the-earth grandmother back home and make it in and out of the Ivy before nightfall. You would never catch me going there, nor leaving, at such an hour.
So I took Ma over to my friend’s, but little did I know some of our more hardened, grass-loving friends would be there jamming to the same tracks I was asked to hear. Suffice it to say, when they saw Ma getting out of the vehicle with me, everything was either blown out or hidden. Those guys were actually warm, accommodating, and respectful of her presence. Just know that certain types of tracks were not played while she was around. I can still see her standing there, obviously uncomfortable, but she held her poise. Ma always trusted my judgement and never pressed for an early exit. When we finally did so, some forty minutes after arriving, she waited until we sat in the car, leaned over to me, and said, “In life, two things closely opposed cannot be true at the same time.” Back then, I thought she was second-hand high and sorely regretted letting her tag along.
What she said made far more sense after I became a professional economist. She just didn’t trust the motives of those guys. I’ll close this article by drawing some conclusions inspired by her wisdom and the commotion surrounding the report. Firstly, a government in a small open economy can use a capital expenditure strategy to drive short-term growth by encouraging construction of hotels and supporting infrastructure. Alternatively, it can commit to capital expenditure focused on building infrastructure with a clear plan to attract businesses to utilise it—prioritising slower short-term growth for greater long-term gains. Unfortunately, these strategies are mutually exclusive. Traditionally, one does not lead to the other. The first almost guarantees an overreliance on foreign debt, which becomes difficult to pay off.
You can tell I am not too encouraged by the building boom in Barbados. It comes across as though the philosophy is “build it and they will come”. They very well may, but the question remains: what then keeps them here? Another truth, and I point my finger at us—the general public—when I write this, is that a growing economy does not mean that wages are meant to grow as soon as that growth is felt. Basic labour economic theory suggests that, especially in small open economies, wage growth substantially lags behind overall economic growth. In practice, the two almost behave as polar opposites. I know this may not sit well with some of you, but this is largely due to the modern modus operandi of our unions. I am not saying it is deliberate—there is an entire article I could write on this alone. Essentially, pushes for wage increases tend to happen while the economy is tightening. However, this needn’t be the case. If we ignore the aforementioned effect of unions, it simply comes down to the demand and supply of labour.
Given that the Central Bank and the Barbados Statistical Service report that unemployment is steadily falling, one might think there’s no real “natural” driver for wage growth on the island. It leaves the impression of an “oversupply” of labour, which is always met by wage stagnation, regardless of other factors. Remember what my grandmother said.