Recommendation for Export Diversification in Caribbean Countries Post-COVID-19: Insights from CDB Study

Barbados and other Caribbean countries are being advised to diversify their goods and services exports if they want to expand economic benefits in the post COVID-19 pandemic years.

That recommendation comes in a study from economists at the Barbados-based Caribbean Development Bank (CDB) who advised that “before countries can reap the benefits of diversification, policies must be created to address several considerations in the local economy as well as those that arise in the export market”.

This included creating an enabling environment for business and entrepreneurship.

The research, Business Unusual: Towards Export Diversification For Sustainable Growth And Development In Small Island Development States, was conducted by Ian Durant, director of the CDB’s economics department, and colleagues Jaron Boyce, research analyst, and Tommy Descartes, economist.

“Overall, this study finds that there are economic benefits to export diversification in the case of SIDS (small island developing states), particularly those in the Caribbean. In addition to enhancing growth, diversification provides a buffer to shocks through its portfolio effect,” the researchers stated.

“Moreover, it can promote higher efficiency in the local economy through the spillover effects provided by new industries. However, before countries can reap the benefits of diversification, policies must be created to address several considerations in the local economy as well as those that arise in the export market.”

The study sought to investigate the relationship between export diversification and growth in SIDS.

“The results show that countries with a higher degree of diversification of goods experience faster growth. On the other hand, it shows that specialising in, and exporting of services also enhance growth,” Durant, Boyce and Descartes reported.

“Such results provide evidence of the possible economic benefits of diversification in goods exports and should therefore signal to policymakers the need for policies aimed at supporting diversification.

“Importantly, the paper supports the development of a dual economic strategy based on diversifying merchandise goods, where possible, through clearly articulated industrial policies but also suggests that greater focus should also be placed on diversifying within the services sector,” they added.

The researchers said there were a number of considerations for policymakers as it related to barriers in the local economy, pointing out that “export diversification is synonymous to economic diversification”.