Published On:Friday, September 03, 2010

* Chamber chief says

recession woes 'not close to being over by any stretch of imagination'

* Says Bahamas at 'standstill' without FDI rebound and tourist influx, both of which endangered by US 'double dip'

* Predecessor says most Bahamian firms 'bottomed out' and adjusted to 'new normal', which means

revenue growth of 1-3% at best

By NEIL HARTNELL

Tribune Business

Editor

The Bahamian economy's short-term recovery prospects are "nil", the Bahamas Chamber of Commerce's president warned yesterday, warning that the recession was "not close to being over by any stretch of the imagination" due to this nation's dependence on external forces that are themselves struggling.

Khaalis Rolle said the Bahamas' economic model made it almost totally dependent on foreign direct investment (FDI) inflows and US tourist visitor/spending levels to drive recovery, and both were under increasing threat from the possibility of a 'double dip' recession in North America and elsewhere, with the next three-six months being key.

"The prospects for recovery in the short-term are nil," Mr Rolle told Tribune Business. "Mr prediction has always been for stability over the next 24-36 months, and then we will see an improved level of confidence come back."

Adding that economic recovery "isn't automatic", the Chamber president said: "If follows the typical economic model, and under that model, when we're totally reliant on the consumer from the US to come here as a tourist and spend money, you're not going to recover."

A rebound would only be possible, Mr Rolle said, if there was an immediate upsurge in US business and consumer confidence, and a reduction in that country's employment numbers, something that was unlikely given the seeming possibility of a 'double dip' US recession.

Foreign

"Secondly, the Bahamian model of economic activity is completely and utterly built on foreign direct investment, and if foreign direct investment is at a standstill, everything else is at a standstill," he told Tribune Business.

"We have a ways to go. It's not, by any stretch of the imagination, close to being over. We have some challenges." US economic policy over the next three to six months, Mr Rolle said, was likely to determine whether it, and by extension the Bahamas, went "deeper into recession".

He was backed yesterday by his predecessor as Chamber of Commerce chairman, Dionisio D'Aguilar, who told Tribune Business that while many Bahamian businesses had "bottomed out" and settled into their "new normal", there was little for the private sector and consumers to get excited about in terms of recovery prospects.

"I think most businesses have settled where they are going to settle," Mr D'Aguilar said. "Most businesses have completed their decline and have bottomed out, and I think this is the new normal.

"Businesses are going to have to fight to get any substantial double digit growth in revenue.

"Indeed, if there's any growth at all it will be in the 1-3 per cent range. I don't see anything on the horizon to get us terribly excited.

"Ray Winder summed it up wonderfully [in yesterday's Tribune Business] in that the only item that will cause an uptick is foreign direct investment. There is nothing else out there."

Both current and former Chamber presidents thus agreed with Mr Winder and the Central Bank of the Bahamas, as each expressed growing concern yesterday over the prospects for a Bahamian economic recovery occurring in 2011. Mr Winder even suggested that without a major foreign direct investment rebound, a recovery in this nation may not be seen until 2012 at earliest.

The private sector's weakness was highlighted by the Central Bank's report on monthly economic and financial developments in July, as some 27 per cent of all commercial loans to Bahamian businesses and firms were said to be in arrears.

The Bahamian commercial banking system has an estimated $1 billion in outstanding credit to Bahamian companies, and the Central Bank reported that commercial delinquencies increased by $2.1 million to $270.6 million in July, as a $1.4 million decrease in short-term arrears was outweighed by a $3.5 million increase in non-performing loans.

Mr Rolle acknowledged that some companies with overdue loans were likely to go out of business, although those with greater strength might have the ability to refinance at more favourable rates and obtain some "breathing space".

Describing the private sector's health, Mr Rolle told Tribune Business: "I think the current state is tenuous at best, especially small and medium-sized businesses and businesses that rely on services. I know a lot of service businesses are being impacted. Companies in property management, facilities management, janitorial services, who are cutting back. We've got some challenges."