The International Monetary Fund (IMF) has slashed its 2016 growth forecast for the Bahamas by a further 0.7 percentage points to just 1.5 per cent, due to the Baha Mar impasse.
The Fund, in a statement on a December 7-11 mission to this nation, brought its growth estimates into line with Standard & Poor's (S&P), while also shaving another 0.2 percentage points off the Bahamas' 2015 expansion.
The IMF now expects the Bahamian economy to have grown by just 1 per cent in 2015, a move that marks the third revision to this estimate.
It had previously cut this nation's 2015 growth estimates from 2.3 per cent to 1.8 per cent, and then to 1.2 per cent. The latest move means the IMF has shaved more than a full percentage point from its 2015 Bahamas growth forecast in less than one year - something it has also done for 2016.
The new 2016 growth forecast represents a second revision. The IMF had originally forecast 2.8 per cent GDP expansion for the Bahamas in 2016, a figure it had already altered once to 2.2 per cent.
The latest change, announced in an IMF statement on Friday, effectively shaves around $56 million off the Bahamas' projected economic growth next year, based on this nation's $8 billion economy.
The downward revision will come as little surprise to many, given the weak macroeconomic environment and a Baha Mar debacle that has yet to be resolved despite the Government's seeming optimism.
The Bahamas seems even further away from the average 7.5 per cent GDP growth that the IMF itself has said is necessary to both halve the existing unemployment rate and absorb all new workforce entrants between now and 2018.
About the only 'good economic news' highlighted by the Fund's statement was the relatively successful Value-Added Tax (VAT) implementation. Otherwise it was grim reading, with international reserves "low" at just 2.2 months' worth of imports.
Jarkko Turunen, the IMF's mission head to the Bahamas, said: “GDP growth remains modest, projected to have been around 1 per cent in 2015 and, following the further delay in the opening of the Baha Mar resort, growth is now projected to rise only to 1.5 per cent in 2016.
"While there is significant uncertainty about the timing of the project’s completion, Baha Mar’s opening is likely to provide an additional boost to growth. Unemployment is high and inflation moderate (at 1.6 per cent in August), with the temporary increase from VAT introduction tempered by the impact of lower energy prices.
"Gross international reserves remain low, at $774 million (end-October), equivalent to about 2.2 months of imports of goods and services. The large share of non-performing loans (15 per cent of total loans at end-October) continues to constrain bank lending. Central government debt is estimated to have increased," he added.
"However, the January 2015 introduction of a broad-based VAT, with a low standard rate and few exemptions, has contributed to fiscal consolidation. Reports of VAT implementation thus far are encouraging, with revenue exceeding expectations."
To reverse the Bahamas' seemingly slow economic decline, the IMF statement urged the Government to move on structural reforms it had identified in its 2015 Article IV report.
“Near term challenges stemming from the low growth environment underline the importance of implementing past policy recommendations," Mr Turunen said.
"Specifically, the 2015 Article IV report recommended structural reforms to support strong and inclusive medium-term growth and competitiveness; rebuilding fiscal and external buffers; and policies to preserve financial sector stability."
The IMF statement appears to suggest that the Bahamas' pace of reform is too slow, and that numerous structural imbalances will continue to restrain economic growth unless removed or corrected.
"Continued fiscal consolidation, through steadfast implementation of the VAT with few exemptions and expenditure rationalisation, together with public enterprise reform, remains critical to sustaining macroeconomic stability," Mr Turunen said.
"Finalising and implementing the National Development Plan, and further progress in energy sector reform, remain priorities."
The IMF's statement echoes the recent full Bahamas country analysis produced by Standard & Poor's (S&P), which had previously downgraded this nation's creditworthiness to just one notch above 'junk status'.
The fact that the Fund's latest assessment is almost perfectly aligned with that of the credit rating agencies is another sign of the urgent need for the Bahamas to reverse its present economic direction.
For S&P's 2016 GDP growth forecast of 1.5 per cent now perfectly matches the IMF's, with the former warning that “material benefits” from the Baha Mar project are more than two years away.
The credit rating agency predicted there would be no “significant changes” to this nation’s economic outlook until 2017-2018 - a diagnosis that will weigh heavily on the Government’s fiscal performance.
For despite a relatively successful VAT implementation, S&P warned that the Christie administration - and its successor - will have “limited fiscal flexibility” without faster economic growth.
Its country analysis added that the Government had “limited capacity”, which inhibited its plans to address “some of the growth bottlenecks and structural problems plaguing the Bahamian economy”.
The IMF's December 2015 mission met with Michael Halkitis, minister of state for finance, and Central Bank governor Wendy Craigg, plus unnamed government officials and private sector representatives.
It was intended to pave the way for the Fund's full 2016 Article IV assessment of the Bahamian economy, which is scheduled to take place in March next year.