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Imf Cuts Bahamas 2015 Growth 25%

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The International Monetary Fund (IMF) yesterday cut its projections for Bahamian GDP growth in 2015 by 25 per cent, meaning this nation’s focus has “got to be” economic expansion and job creation.

The Fund, in its latest World Economic Outlook, slashed the Bahamas’ economic growth outlook for 2015 from 2.8 per cent to 2.1 per cent, although it provided no reasons for taking this action.

The cut, likely influenced by expectations that the global economy’s performance will be weaker than anticipated, will also probably have been induced by Baha Mar’s later opening (pushed back to late Spring 2015) and the potential negative impact from Value-Added Tax (VAT) implementation.

The IMF’s revised projection for 2015, a crucial ‘make or break’ year for the Bahamian economy, brings it into line with the Wall Street credit rating agencies, Moody’s and Standard & Poor’s (S&P), both of which have forecast GDP growth of around 2 per cent for the Bahamas.

Given that the Bahamian economy’s total annual output (GDP) is estimated at around $8.932 billion for the 2014-2015 fiscal year, the IMF’s revised estimate effectively slashes $62.5 million off this nation’s projected 2015 growth - a significant number.

And, while 2.1 per cent is not to be sneezed at, it again highlights how far the Bahamas has to go to achieve the 5.5 per cent average GDP growth rate deemed necessary by the IMF to slash existing unemployment by 50 per cent - and absorb thousands of annual school leavers into the workforce - by 2018.

Robert Myers, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman, yesterday called for a renewed focus on economic growth strategies in the wake of VAT implementation.

“That’s all we should be focusing on now; a growth strategy,” he told Tribune Business. “We’ve done as much taxation as the public can stomach, and now it’s got to be growth.

“The Prime Minister knows that, Khaalis [Rolle] knows that and Michael [Halkitis] knows that. The guys that need to know, know that. This is hugely important. It’s the difference between winning and losing.

“We’ve got to get people to work. There are 6,000 kids coming out of school every year. We’ve got to get those people to work.”

Mr Myers conceded that the IMF had shaved “a good bit” off the Bahamas’ projected GDP growth for 2015, but said it was difficult for him to comment further because the Fund did not lay out its rationale for doing so.

The BCCEC chairman, though, said he had “no doubt GDP growth will go up next year” as a result of the impact and activities surrounding the $3.5 billion Baha Mar project’s opening.

“I think it’s probably right, based on an improving economy and the fact that the VAT is going to have a slightly negative effect,” Mr Myers told Tribune Business.

“Quite frankly, it’s reasonable and I hope it’s more. If it’s 2.5 per cent, 2.8 per cent, it will be even better, but that means a whole lot more people employed, and FDI prospects coming out of the ground now to have that effect between now and the first quarter of 2015.”

K P Turnquest, the Opposition’s finance spokesman, yesterday told Tribune Business that the revised IMF outlook for 2015 was “in line with what we expect”.

He said the Fund’s projection was now consistent with what was happening “on the ground in the Bahamas”, and added: “One has to wonder to what extent the uncertainty over things like VAT might have had on these projections.

“Everybody expects there’s going to be some downward effect, particularly on the local economy, as a result of this new tax regime.”

Mr Turnquest said the IMF outlook was also likely to have been “significantly affected” by the delayed Baha Mar opening, given the weight the Government was placing on the project to revive the Bahamian economy.

And the IMF’s World Economic Outlook has also accounted for VAT’s likely impact on living costs in 2015, projecting that the increase in overall consumer prices will jump to 4.4 per cent next year from 1.4 per cent in 2014.

Mr Myers said the IMF estimate was in line with the Bahamian private sector’s 4.5-5 per cent price increase projection, adding: “We would expect it to be right in that range.”

For his part, Mr Turnquest described the IMF’s price impact projections as “very significant”, suggesting they might be on the low side.

“We’re probably going to see an increase in unemployment because businesses will have to make some adjustments and find some efficiencies,” he said in relation to VAT.

“The quickest place to have some effect is in payroll. Overall, we’ll continue to see a rise in mortgage arrears as well as increased demand for social services. I don’t see a pretty picture at all.”

The Fund’s 2015 growth projection is also more than the 1.2 per cent GDP expansion that the IMF is predicting the Bahamas will achieve for this year.

The Fund earlier this year slashed its 2014 economic growth forecast for the Bahamas by almost 50 per cent, from 2.3 per cent to 1.2 per cent.

But both the 2014 and 2015 growth projections are well short of the 5.5 per cent average the IMF believes is necessary to achieve a meaningful reduction in both existing unemployment and absorb new workforce entrants.

Comments

dehavmoss 5 years, 1 month ago

It starts with leadership. I honestly don't believe Bahamians realize the long term danger that we are in. We can't account for hundreds of millions of dollars, but yet we make the same decisions over and over and over again.

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akbar 5 years, 1 month ago

Our traditional models of job creation through tourism ,banking and the civil service is no longer viable based on our population growth. We need to start thinking outside the box and start to look into ways of taking advantage of the techno-economy and encouraging entrepreneurship. I remember a period when a large number of students were pursuing careers in computer sciences only to find out that much of their knowledge was not needed at that time. But now there has been a great shift towards people with this knowledge base and expertise all over the world.

We are surrounded by ocean yet all we know about the sea is fishing. With one of the largest ship registry in the world we have but a small amount of economic opportunities for locals. A few maritime careers have been created but the private sector seem to be more enthused about it than the government who seem to be just content on collecting their mandatory fees and taxes.

While I don't believe that government should not be giving handouts thus creating a welfare state, I believe they should put certain policies and mechanisms in place to facilitate diversification of the economy so that a broader base of the population can not only have jobs but actually create true wealth.

I tired of hearing about " Bahamians don't be into this or Bahamians don't be in to that", that's just a tired excuse and a cop out for those that have the power to make changes and to encourage mediocrity. And if we hearing this kind of talk from our leaders what then can we expect out of the general populace?

We must come to the conclusion that everyone cannot be a doctor or lawyer, professions which have become so over saturated in our country that they have become mere status symbols. Too many people vying for a limited amount of funds.

Louis Pasteur once said "Chance favors the prepared mind." Is our educational system designed to prepare young minds for these "out the box" opportunities? Has our colonial approach to education now becoming a stumbling block to our growth as a independent developing economy? Our regurgitation type education system stymies creativity and is based more on memory rather than knowledge building. Time for a change.

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banker 5 years, 1 month ago

We need to start thinking outside the box and start to look into ways of taking advantage of the techno-economy and encouraging entrepreneurship.

Very wise words indeed akbar. My understanding is that the government has a few proposals in front of it for fostering the technology sector and entrepreneurship to build a new economy, and they are rejecting them out of hand because they do not understand the importance of diversifying the monolithic economy, or more likely, they do not care. They are more interested in paying $400,000 per year to a plagiarist partisan to lead a sub-par tertiary institution that is the training ground for brain drain.

The Bahamas has no future, with a brain-dead Prime Minister, a cabinet full of crooks and thieves, and an amoral political party full of tomcats, sexual deviants and liars. The window of opportunity has been closed, and the only rescue can come from the ashes of a country that has tanked, crashed and burned because of its juvenile, criminal, non-patriotic, clumsy leadership, and a population of unenlightened retards that vociferously support the madness.

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NoNoNo 5 years, 1 month ago

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