By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The International Monetary Fund (IMF) yesterday slashed its 2013 economic growth forecast for the Bahamas by 80 basis points, prompting an Opposition MP to urge: “We have to find new ways to grow this economy.”
K P Turnquest, the FNM MP for east Grand Bahama, was responding after the IMF cut this nation’s projected 2013 GDP growth from 2.7 per cent to just 1.9 per cent.
Based on the Bahamas having an $8 billion annual gross domestic product (GDP), the impact of the IMF’s actions is to slash roughly $64 million off this nation’s projected economic growth for 2013 - a not insignificant sum for an economy of this size.
And the Washington-based Fund also cut its predictions for the Bahamas’ economic growth for 2014, dropping this to 2.1 per cent from the 2.5 per cent forecast it gave as recently as April this year.
Mr Turnquest described the IMF’s lowered expectations for the Bahamas as “not surprising”, given the tepid economic climate and uncertainty being expressed in many quarters over Value-Added Tax (VAT) and other government policies.
The Bahamas’ reliance on the US to drive its tourism industry and other key sectors means it is also more exposed than most to any fallout from the recent US government ‘shutdown’, and it is possible this factored into the IMF’s new calculations.
However, pointing to the continued uncertainty caused by the Government’s lack of clarity over its proposed VAT, and fears that its introduction will cause a slowdown, Mr Turnquest said succinctly: “All these new taxes serve as a disincentive for investment and growth.
“If you look at what’s happening in the economy today, and the projects ongoing, there’s not a lot happening with new projects, and even the ones in progress seem to be delayed, so there seems to be some retardation in growth.
The growth forecast cuts are also significant in the context of the IMF’s presentation to ‘High Level Forum on the Caribbean’ at Atlantis last month.
The IMF’s Western Hemisphere Department projected that the Bahamas’ needed to achieve an average GDP growth rate of 5.5 per cent between 2013-2018 if it was to achieve even a 50 per cent reduction in its unemployment rate, which has remained stubbornly high at around 14 per cent.
The IMF’s latest revisions show the Bahamas achieving less than half the necessary economic growth, with GDP expansion in 2018 projected to be just 2.5 per cent.
The country’s forecast growth rates for the next five years are also below the 4 per cent level deemed necessary by the IMF for the Bahamian workforce to absorb the 5,000 graduates leaving high school every year.
“It obviously means we’re going to fall short of that goal,” Mr Turnquest, a former Grand Bahama Chamber of Commerce president, said of the implications of the growth rate cuts for the 5.5 per cent target.
“That’s going to result in increased unemployment, particularly among the youth and the unskilled. It will have a knock-on effect, with consumerism down, less business growth, and that may lead to further job losses.”
Indeed, the projected 2013 growth rate is relatively flat alongside the 1.8 per cent GDP expansion achieved by the Bahamian economy in 2012, and the 1.7 per cent expansion in 2011. This nation’s growth rate appears to have plateaued.
Mr Turnquest told Tribune Business that the Bahamas needed to look at revising its economic model, moving away from its traditional reliance on foreign direct investment (FDI) to avoid “boom and bust” cycles.
He also called on the Government to examine its cost structure, and particularly look at exiting unprofitable entities - such as Bahamasair - that were better turned over to the private sector, either through privatisation or bringing in competition.
“We have to do better,” Mr Turnquest told this newspaper. “We have to find new ways to grow this economy, and depending on foreign direct investment may not be the model we need to look at.
“We need to look at incentives to support domestic investment, and get out of this pattern of boom and bust, and being subject to the volatility of local markets.
“We need to have our own plan, and not be knee jerk with the initiatives we put in place.”
Calling for an examination of the Government’s costs and spending to go beyond the civil service, Mr Turnquest said it “seriously needs to look at getting out of unprofitable quasi-governmental agencies” where the private sector could “pick up the slack”.
While many equated full or partial privatisation of public sector entities with job losses, Mr Turnquest said this did not have to be the case if these processes were designed, and handled, correctly.
Arguing that it was impossible for the Government to provide for all, the MP told Tribune Business: “We have to stop thinking we can be all things to all people; that we can be parents to all people.
“We just can’t afford it. Socialism’s fine in a growth period, but in a down period it’s a serious liability. You’re trying to provide all the services you have done, at the same level, with reduced revenues.”
The Government’s planned VAT, which is designed to generate a net $170-$200 million increase in tax revenues, will impose another level of austerity, and is effectively a massive transfer for wealth from Bahamians (consumers) and the private sector to the public sector to get it out of its debt hole.
Mr Turnquest suggested the effect of increasing taxation would be to “squeeze the middle class”, and force higher income earners into a position where they said “to hell with it, I’m not going to invest any more”.
Looking ahead, Mr Turnquest added: “Unfortunately, I think we’re faced with some very difficult choices. It’s going to take level heads and commitment to do the right thing, depending on what form it may be.
“Government needs to lead, and inform the community about why they are making these decisions.”
Mr Turnquest also noted the “contradiction” in the IMF’s position, namely that it was calling for the very tax increases and austerity it said was going to result in reduced Bahamian economic growth.
Comments
ColumbusPillow 10 years, 6 months ago
Cost of Bahamas electricity is 6 to 8 times the Florida rate. The only way Bahamas can have any growth is for it to reduce this energy cost.
Energy cost can be reduced when Bahamas allows oil and gas exploration...either offshore or onshore.
We have been stalled for 3 years in obtaining a license to drill an onshore gas well.
Reality_Check 10 years, 6 months ago
Agencies of U.S. government (i.e., IMF, WTO et al.) all tell PLP and FNM governments alike the Bahamas must borrow heavily during bad economic times (i.e., highly inefficient government economic activity must step in when much more efficient private economic activity declines), then these same agencies tell the Bahamas government that the Bahamas taxation system must be changed from customs duties to VAT asap (no matter how disruptive and damaging to the economy), and then, finally, these very same agencies come along and down grade the economic health of the Bahamas so that it finds itself having to pay higher amounts of interest on increasing amounts of foreign currency denominated debt when it can least afford to do so, and so the financial health of the Bahamas continues to spiral downwards, almost out of control, as the U.S. desires and considers to be in its own economic and national security interests..... Bahamians are really too stupid to have a well managed sovereign nation....they ask (deserve ?) to be stomped on by foreign interests!
nationbuilder 10 years, 6 months ago
No surprise, as the growth numbers for the budget were boosted well above what was reality anyway, so the "downgrade" is actually what the numbers should have been
John 10 years, 6 months ago
This should come as no surprise as persons in the retail markets and consumer orientated industries saw a softening of the economy since January. In fact the economy was somewhat "'falsely" inflated in April and May, when millions of dollars were being spent on the gambling referendum. Many of the capital projects that were started under the previous government have been completed, so persons employed on them are now idle. No new projects have been started thus far. The Bahamas must find a way to wean itself off total dependence on the US economy and be cautious of borrowing heavily from China and other countries. One good step would be to reduce the food import bill by reactivating the farming industry in the Family Islands. Being self sufficient in food, or at least self sustaining can go a long was in cutting imports and consideration should also be given to cultivating crops that can be exported. Fishing seems to have been exhausted to the point where it is very difficult to fish on a commercial level and remain competitive and the concern of fish farming, and the contamination it can cause must be weighed. Bahamians must have access to ownership in major developments in this country. No future developments should be considered unless the developers are willing to offer at least 25% of the projects to Bahamians. That way Bahamians can invest in their own economy and profits too will remain in the country rather than just wages and salaries. Finally government must cut its appetite for borrowing on the whole. In the 1990's the national debt was 1 billion plus. By mid 2014, it will be $5.5 billion. That means that each and every Bahamian will owe FIVE times more in 2014 than what was owed in the 1990's. This is in addition to their own personal debt. If the world economy takes another serious dive in 2014, and there is a great chance that it will, Bah Mar alone will not be a big enough life raft to save the Bahamian economy. Food supplies in this country can disappear in one week. Where is the back up plan?
Straight_Talk_Bahamas 10 years, 6 months ago
You paint a bleek picture... but I agree with everything you 100%. Unfortunately non of our leaders have the testicular fortitude or vision to do what has to be done.
concernedcitizen 10 years, 6 months ago
I AM USING CAPITALS B/C NO ONE SEEMS TO GET IT ..WE ARE LOSING TOURIST NUMBERS TO OTHERS IN THE REGION .IN THE PREVIOUS 8 MONTHS "THE SEASON " OUR STOPOVER VISITOR ROOM NIGHTS DROPPED 4.9 % WHILE THE D,R ,CUBA AND JAMAICAS GREW . B/C OF THE COST OF OUR OVERSTAFFED PUBLIC SECTOR WE HAVE A VERY EXPENSIVE TOURIST PRODUCT AND SERVICE THAT IS MEDIOCRE AT BEST ..WE ARE ARROGANT UNDER EDUCATED AND SEE SERVICE AS BENEATH US . IT WILL NOT GET BETTER AND VERY FEW OF THE POLITICIANS TELL THE PEOPLE THE TRUTH ..IT IS NOT THE WTO , IMF OR THE U/S FAULT .THE PEOPLE TOURIST HAVE FOUND BETTER VALUE FOR THERE MONEY ,WE ARE NOT THE ONLY ONES W/ SUN ,SAND AND SEE ALTHOUGH THE POLITICIANS KEEP TELLING US HOW SPECIAL WE ARE ,,WELL GUESS WHAT THE D,R MUST BE REALLY SPECIAL B/C THEY DID 4 MILLION STOPOVER LAST YEAR ,,WE DID 1.35 MILLION ..NUMBERS DON,T LIE ..WE HAVE PRICED OUR SELVES OUT OF THE MARKET ABSORBING PROLIFIC BABY MAKING W/ PUBLIC SERVICE JOBS ..
John 10 years, 6 months ago
Well lets add some sunshine to that bleak picture> Lets name some of the crops that are easily grown in the Bahamas: tomatoes, mangoes, cabbage, lettuce, key limes, cassava, soursop, sweet corn, onions, bananas, grapefruit, tangerines, oranges, sweet pepper, goat pepper, bird pepper, guavas, pigeon peas, avacadoes, papaya, celery, leaf tyme potatoes watermelons. In addition there is fish, conch, mutton, chicken and eggs, lobster. The problem is why is Bahamian produce not available nationwide in the Bahamas? Why do mailboats leaving out of Nassau have to return from most family islands empty? Whatever happened to the plans to put canneries and banana ripening plants and bottling factories in strategic family islands. We have a captive market of over 5 million tourists, and while they may not be able to take fresh produce back home with them how much of it can be consumed by them on a three of four day or week vacation? and they can take back bottles of jams and jellies and fresh lime juice, and natural sea salt, And Bahamians who cannot fresh fish and conch can have access to frozen or dried produce. All government needs to do is to stop having farmers produce large amounts of crop only to send it to New Providence to b dumped. Employ the logistics of getting produce from the farm to the dinner table in the shortest time. And ven if the economy gets worse Bahamians can have access to fresh, wholesome foods, even if they have to barter with neighbours to get it.
concernedcitizen 10 years, 6 months ago
ONE ,who is going to work these farms ,our little darlins , better get ready to give more hatians permits ,if we grow more and import less the goverment will lose a lot of revenue ,but i guess they will make it up w/ all the firtilizer and equipment we have to import .Three who is going work these farms our lil smart phone totin ,lotion wearing darlins ,,come on man get real ,farming is like fishing its in your blood or its not .Four we don,t have 5 million stopover tourist a year we have 1.35 million the Domminican republic has 4 million a year and on an economy of scale they can farm b/c they have the volcanic soil and cheap labor ,,really yeah by the time you import the fertilizer ,soil ,equipment etc to farm on coral rocks you can grow a 10 dollar tomatoe ..and when people go on about how are bananas our better then doles ,,bullshit ,,its like saying you can grow apples like the annapolis valley in nova scotia in cat island and they will be as good ,,baloney ,certain soils ,temperature and regions grow different fruits and we don,t have the right mix to farm profitably on an economy of scale ,,shit we been trying since the loyalist ,,
SP 10 years, 6 months ago
Were screwed.
Fact is, the former FNM administration left the country "ham-strung" with too much debt, and unable to move left or right. This compounded by 25,000 foreign blue collar workers brought in by the FNM that do not support the local economy, which lead to more government spending to support 1000's of unemployed Bahamians displaced by these foreigners.
The real problem now is this PLP government does not have the fortitude to reverse the foreign blue collar worker problem caused by the FNM, or the required backbone to effectively deal with illegal migration.
FDI is only part of the solution (if it existed in bigger numbers) and VAT will only exasperate our problems especially in the short term. (3-5 years)
There can and will be no turn around in the Bahamian economy until government deal with the 25,000 blue collar workers brought in by the FNM and simultaneously address the illegal immigration situation.
These people are a major drain on the economy, add significantly to the crime index and prevent the free flow of funds from circulating.
Both PLP and FNM have proven to be totally useless in managing the countries affairs.
Were screwed!
bloody1967 10 years, 6 months ago
THATS THE PROBLEM RIGHT THEIR , BAHAMIANS KEEP BLAMIMG OTHERS FOR THEIR WOES , WE CREATED THIS MESS NOT THEM FOREINGERS OR THE FNM OR THE PLP , US BAHAMIANS AND IGNORANT AND STUPID IDEOLOGY AND FOOLISH BELIEFS LIKE THIS POST .....
concernedcitizen 10 years, 6 months ago
@SP ahh maybe the fact that we did 4.9 % fewer stopover visitors in the 2013 season had something to do w/ it , maybe the fact that other destinations in the region % of s stop over visitors have been growing while ours are declining . The tourist have found better value and service for there money ,,
concernedcitizen 10 years, 6 months ago
where do you get this figure of 25,000 blue collar foriegn workers ,was it campaign rhetoric or do you have actual data from the Department of immigration to back it up .As pro Bahamian as Mitchell is there is no way he would let 25,000 laborers renew work permits .I put it to you this was pure campaign rhetoric and you can find no facts to support there are 25,000 unskilled laborers w/ permits ,it is pure xenophopic campaign talk ..
bloody1967 10 years, 6 months ago
Look the VAT will not change irresponsible spending , ill planning , corruption and just plain old stupid Bahamian Jackjarzzz ideology. We have a National debt of 5.5$$$$ Billion Dollars , now lets do simple math , with Interest on our national debt over $500, 000,000 that's MILLION per year ALONE and rising daily , in a country with lets say 300,000 spending consumers , who may contribute upto $500 a person a year in VAT consumption payments that equates to around $150,000,000 MILLION dollars per year , not even enough to take a bite out of the INTEREST payment , now lets say that we MUG em all for upto a $1000 a year per person then they get $300,000,000 MILLION , still not enough to even pay the interest down , SO GUESS WHAT , THE PRINCIPLE AINT GOING NO WHERE NO TIME SOON , CAN WE ALL SAY """"BANKRUPCT"""""" , DOSE NOT MATTER WHO IN GOVT.... yinners better hope we got OILE cause ya still cant change _hit into GOLD
Baha10 10 years, 6 months ago
Instead of focusing on increasing prooductivity in the hope of emerging from recessionary times, it would appear our PM is instead focused on working less by declaring Public Holidays. Unlikely to be the most effective strategy as we continue to stumble towards bankruptcy.
John 10 years, 6 months ago
First of all most of the little darlings you see walking around with cell phones, originate from islands where fishing or farming or both were the mainstay of that island. They were only lured to New Providence by the dream of finding better paying jobs or getting an education to get a better paying job. So they do have farming in their blood. Secondly, yes the government will lose revenue as more food produce is grown and less is imported. But besides winning on the importation of farming equipment and supplies, they will benefit by not having a large import food bill and it may reach the point where some of locally grown produce is exported and government can realize an export tax. Third, regardless of the number of tourist we have, stopover or otherwise, imagine if 50% of what they eat while in the Bahamas is grown in the Bahamas. Then imagine that figure growing to 90 .percent. And the last comment about competing with dole is a bog since Bahamian produce will be given priority. Furthermore the dole bananas and imported waxed tomatoes and mangoes may look better in the store but Bahamian produce, naturally grown taste better every time. One time ago Bahamians use to search out Bahamian produce, like green pigeon peas, especially at Christmas time, and cassava and fresh pork and Long Island mutton and Eleuthera pineapples but we have been brainwashed by advertising campaigns to believe the more plump, shiny produce artifically grown and inseminated with growth hormones is better, just like we have become addicted to fast food. Bahamians survived on what was successfully grown in the Bahamas and pinapples, tomatoes and citrus was exported around the world. Check the cancer rate and other diet related illnesses of Bahamians over the past twenty years. Compare even the cancer rate of persons living on the family islands to that of those in New Providence. Of Cause you will have pockets of high rates of cancer where the water supply was overchlorinated.
concernedcitizen 10 years, 6 months ago
THE breast cancer rate and others has to do w/ something called consangunity and b/c some people are gluttens and can,t control what they eat ,,i live on a family island w/ no fast food and the obesity rate here is alarming ,which leads to cancer ,diabetes ,etc etc ,,whatever you say boss ,for 200 yrs we been trying to farm rocks ,,i
John 10 years, 6 months ago
The slash and burn technique of farming ha been very successful in the Bahamas for many generations. The ash from burning adds humus and other and other substances o the thin layer of top soil we do have. And with regular watering and a handful of fertilizer many of the crops listed can be grown. Compare sweet peppers or tomatoes grown this way to ones bought from the food store. Put them in the sun for two hours and see what happens to them. The imported ones are just skins full of water. They look more plump and 'juicy' in the store but they taste bland As for your idea about $10.00 mangoes get real! When mangoes are in season , even in New Providence no one can sell them, they have to give them away. During his time the food stores reduce their prices to as low as 59 cents for mangolas of stop importing them. Can you imagine what can happen to the prices of food if we stop being sour puss' and complaining about everything and re-introduce large scale farming in this country?
John 10 years, 6 months ago
The next time you go into a food store check the grits and the potato chips and corn chips and some flour products..they are all marked "for export only" or "not for consumption in the United States" Ever wonder why? Because they are made from genetically altered grain. Grain that has had insecticides imbedded in the crop to stop it being eaten in the fields, grain that is engineered to yield more crop per acre, grain that grows faster and ripens more uniformly amongst other things. So why isn't it allowed to be consumed in the USA? Because the food and drug administration has not yet determined if the genetically altered grain is safe for human consumption. So they ship it here to us guinea pigs in the Bahamas and the rest of the Caribbean.
concernedcitizen 10 years, 6 months ago
Duhh they are marked for export only b/c they are not taxed and can not be sold in the U/S ,,As for genetically altered grains, fruit etc people have been doing that since the Incas w/ potatoes ,it was called grafting ,,Sir your post above is not factual at all the export only has to do w/ taxes not quality ..How come the U/S life expectancy is increasing while ours is decreasing ,b/c even the family island i live on w/ no fast food we eat like pigs ,being over weigth is one of the main cuases of most health problems including cancer ,plus we use way too much salt ..
banker 10 years, 6 months ago
I have toured the family islands. Up to 20 years ago, there used to be farming communities in Farmers Hill, Moss Town and Roker's Point. They are virtually deserted. And the Eleuthera pineapple plantations were largely destroyed and never replanted. A thousand acres of orange trees were burned because of citrus canker. The only major grower of poultry in New Providence went under after the Canadian owner was killed. There is now one major poultry producer on Grand Bahama now and they are struggling against subsidized imports. The only agricultural products worth having come from meeting the mailboat and buying the Mennonite produced stuff from Andros. Who can afford the Gladstone Farm stuff, and the Symonette boys at Lucaya sell almost exclusively to restaurants. No one will work on the farms these days due to hard work and poor pay. Cat Island used to produce a lot of tomatoes. That died. The farming knowledge has pretty much been lost.
B_I_D___ 10 years, 6 months ago
Farming is akin to slavery, it is beneath our narrow minded and brainwashed society and we will continue to be slaves to the countries that provide us our food.
concernedcitizen 10 years, 6 months ago
Damm the U/S gave us Brahma cows that could survive here in Andros ,the ones we didn,t eat we were too lazy to feed and they starved,,
John 10 years, 6 months ago
God Created man to till the soil and to care for animals so you are saying that God created slaves. But in the first instance before man fell (out of favor with his Creator man did not have to till the soil or feed the animals. All he had to do was serve God and keep his commandments. But when he teamed up with satan and defied God's law we got to the point we are at now. "By the sweat of your brow shall ye eat bread..." there's nothing new under the sun.
banker 10 years, 6 months ago
There are lots of ungodly heathen countries doing quite well for themselves.
SP 10 years, 6 months ago
Staunchly supporting your red, gold and green shirts is exactly the reason we are in this position today.
The prediction is the economy of the Bahamas will not just REMAIN in freefall, but the decline will escalate, as more and more cracks appear in various sectors due to the continued "trickle up" effect of non-spending in the local economy by foreign and illegal workers.
It is totally asinine for anyone to believe we can displace locals with 25,000+ foreign blue collar workers and have another 50,000 illegal workers not contributing to the local economy while also taking jobs from locals and hope to survive with such a small workforce and economic base.
Say what you like, the reality is clear for all to see and feel !....Ask the IMF!
banker 10 years, 6 months ago
Co-sign. Agree fully with the prognostication. It can be saved, but democracy would have to be suspended to do it. Democracy is too easily subverted in the Bahamas.
John 10 years, 6 months ago
That is why the bible says , I will bless the just will be as well as the unjust..".
concernedcitizen 10 years, 6 months ago
with all the hat wearing ,church going ,god quoting we do and we have a murder rate like a war zone ,countries that are a lot less bible quoting ,church wailing and much more liberal ,norway ,sweden ,etc have the lowest crime rates in the world ,more people will be killed to prove who has the right God ,the Muslims w/ their Bombs or the Christians w/ their drones in the next year and then the year after that they will continue killing to prove who has the one true God ,the jews ,the christians ,or the muslims ,,kind of strange the Buhdist don,t kill to prove their God is the right one ,,lol
John 10 years, 6 months ago
Why do some people get so offended and riled up when the name of God is mentioned..like in John 3:16
John 10 years, 6 months ago
One can never produce too much food..At least if the US economy goes bottoms up (as some predict will happen in the near future) and ours follows not too far behind, Bahamians will be able to feed themselves. There may not be any fuel to run BEC or put in our cars but we can grow enough crops to sustain ourselves. Even if it means many will have to leave Nassau and move back to the family islands.
concernedcitizen 10 years, 6 months ago
Remember the Brahma cows giving to us by the U/S ,,hows that farming going ,,remember hatchet bay ...I put my life on the line that of the 5000 kids graduating every year you couldn,t get a hundred to work farming in the hot sun /dirt and although farming has been modernized w/ expensive very costly equipment ,it still requires a lot of low skilled /low wage workers to do back breaking work ,,good luck finding that
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