The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A former finance minister yesterday described the latest bout of global stock market volatility as “rather disconcerting” for the Bahamas, adding it was occurring when this nation “can least afford it.”

James Smith, CFAL’s chairman, told Tribune Business that the latest turbulence was coinciding with the Bahamas’ peak tourism season, while this nation had yet to fully recover from the last recession.

More than £80 billion has been wiped off the value of shares on the London Stock Exchange’s (LSE) main FTSE 100 Index within a week, with stock prices in New York and other key markets also taking the same downward plunge.

The Bahamas is far from immune to the ramifications, due to the ‘wealth loss’ among high-end travellers and investors with large stock market positions, and who represent the mainstays of this nation’s tourism, financial services and foreign direct investment (FDI) engines.

“It’s rather disconcerting for most countries,” Mr Smith told Tribune Business, particularly in the Western Hemisphere, because it might be too early to call. We might be headed into another severe recession.”

The ex-minister of state for finance in the 2002-2007 Christie administration said it was unclear whether the stock market volatility was being caused by irrational investor fears that would ultimately be corrected, or deeper, more fundamental changes in the global economy.

Many of the concerns relate to fears of a Chinese economic slowdown and a drop in the demand/price of commodities, coupled with the weak global recovery momentum and sharp drop in oil prices.

But Mr Smith said countries with negative interest rates, such as Japan, were not experiencing the normal rush into stock market and real estate investments.

“All these things have to at some point impact the confidence of the consumer, and when they get the jitters they reduce discretionary expenditure in areas like travel,” he told Tribune Business.

“It comes at a time when we can least afford it, especially in this quarter.”

That is a reference to the Bahamas’ peak winter tourism season, which usually occurs in March/April. However, with Easter falling earlier this year, Mr Smith said the tourism impact would likely be lessened, given that most visitors would have booked vacations prior to the stock market dive.

“We’ve been down this road before,” he told Tribune Business. “We’ve seen the impact internationally to economies around the world when in the great recession of 2008-2009, which is still affecting us.

“When there’s a drastic shock to the global economy, we will feel it. The only question is: To what degree?

“We’ve already been on a big climb out of a deep hole, and the one thing we don’t want is any kind of slippage. We really need to take a deep breath and a couple of steps back to see what is happening. There’s no way of telling if this is a blip or the beginning of some deep downward trend.”

Mr Smith said there were unlikely to be any further revisions to the Bahamas’ 2016 GDP growth forecast, which has been pegged at around 1.5 per cent, simply because it had already experienced several downgrades.

He added, though, that the Bahamas would be boosted by the dramatic drop in global oil prices, as this would increase consumers’ disposable income and consumption spending.