The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The ‘negative’ real GDP growth data published by the Department of Statistics is “contrary” to previous IMF and rating agency estimates, the Chamber of Commerce’s chairman said yesterday.

Gowon Bowe told Tribune Business that a better understanding of the official GDP growth statistics, released on Friday, was required to determine why they were different from prior estimates by the International Monetary Fund (IMF) and likes of Standard & Poor’s (S&P).

Both the Fund and international credit rating agencies have said the Bahamian economy expanded by around 1 per cent in 2015.

However, the Department of Statistics’ data showed that real or ‘constant price’ GDP actually contracted by 1.66 per cent last year. That represented a second consecutive year of decline, following a 0.52 per cent fall in 2014, suggesting the Bahamian economy has been in recession for two years.

“That’s interesting; that’s contrary to what the IMF and S&P had predicted,” Mr Bowe said of the Department’s 2015 growth data.

“A bit of GDP growth is what they estimated, with both real and nominal GDP. They certainly haven’t indicated that we’ve had negative constant dollar growth. They’ve not taken the view that we’re in recession.”

The ‘constant price’ measurement strips out inflation’s impact on the GDP data, and Mr Bowe told Tribune Business the discrepancy with international estimates was easily explained if the Department was using a pre-recession year as its ‘base’.

If it was, then the negative ‘constant price’ GDP can be attributed to the anemic economic growth the Bahamas has enjoyed since the 2008-2009 recession, which has failed to compensate for what was lost during those two years.

“We haven’t been growing the economy fast enough to make up the shortfall that took place in the recession,” Mr Bowe said.

Suggesting that the Department of Statistics data provided further evidence to support what many in the private sector had been saying, he added: “We have to grow the economy faster, and have to get nominal growth to 5 per cent to contract unemployment.

“We’ve been meandering at the 1 per cent level. We are still challenged in getting GDP growth to stay consistent, and this is more evidence of the story we’ve identified.”

Mr Bowe said a small amount of inflation was not necessarily bad, as price rises showed “spending is taking place and there is more demand in the economy”.

Describing this as “controlled inflation”, he added: “Constant dollar prices are for the economists. Let them worry about the issue.”

The Christie administration’s main political opponents, meanwhile, said the Department of Statistics data “puts a lie to the Government saying that the economy is growing and that they’re doing a good job in expanding it”.

K P Turnquest, the FNM’s deputy leader, told Tribune Business: “I think it is accepted that we have to grow our GDP, not only to sustain our current standard of living but also to absorb all the school leavers who come out next month.

“It’s [the data] very worrying, especially when you consider the pressure on financial services, which is having a significant impact on the middle class. It’s very concerning.”

The Department of Statistics found that arguably the Bahamas’ three most important industries - hotels (tourism), financial services and construction - all contracted in 2015, contributing the negative ‘constant price’ GDP.

“It tells us that the tourism sector is not growing significantly at all,” Mr Turnquest said. “The construction and hotel industries give us a real indication of what is happening in the economy.

“This relates to the ability of potential homeowners to qualify for mortgages, and service mortgages, and is directly tied to job growth.”

Meanwhile, gross capital formation, which measures investment in buildings, equipment and infrastructure, shrank by almost 12 per cent year-over-year in 2015.

And household/consumer spending, which accounts for about 70 per cent of GDP, contracted by 6.5 per cent in constant prices.

“It points to the fact that the level of capital investment in the economy is going down, which is worrisome because it is not only an immediate problem but a long-term one,” Mr Turnquest said.

“While the Prime Minister talks about these investment projects on the drawing board, it calls to mind the saying: ‘While the grass is growing, the cows are starving’.”

The Department of Statistics data revealed that the value of Bahamian goods and services exports, in current prices, declined by 6.6 per cent year-over-year in 2015. Measured in constant prices, they were down 7.2 per cent.

This was driven by a 35.8 per cent fall in the worth of goods exports, with mineral fuels and oils down $95 million. Chemicals and related product exports decreased by $110.7 million, while local spending by international (offshore) companies dropped 8.3 per cent.

Goods imports, which normally account for 70 per cent of all imports to the Bahamas, fell by 16.6 per cent when measured in current prices - aided chiefly by the drop in global oil prices.

The value of imported mineral products dropped by $333.2 million or 34.8 per cent, while iron/steel articles were down by $43.1 million or 32.3 per cent.

The worth of imported machinery equipment declined by $59.6 million or 12.2 per cent, while optical photographic and measuring apparatus experienced a $40.9 million or 59.5 per cent drop in value.

Services imports slumped in value by 31.8 per cent, with construction leading the way through a 64.9 per cent or $417.3 million decline.

The latter, in turn, led to a 42.1 per cent or $292.3 million year-over-year fall in the value of non-residential construction, with both impacted heavily by the end to work on Baha Mar.

Residential construction, though, grew by $26.1 million or 15.4 per cent, while machinery and transport equipment - traditionally representing 43 per cent of total capital investment - declined by $7 million or 1 per cent.