By NEIL HARTNELL
Tribune Business Editor
The Government appears to have avoided the “typical pie in the sky” pre-election Budget, the Chamber of Commerce’s chairman said yesterday, while conceding: “The numbers may tell a different story.”
Gowon Bowe told Tribune Business that Prime Minister Perry Christie’s 2016-2017 Budget communication appeared to have struck the “right message” when it came to the Bahamas’ fiscal and economic situation.
But, while praising it for being “even keeled and not overly-optimistic” in comparison to past pre-election Budgets, Mr Bowe said that analysis could change once he and the Chamber dug deeper into the numbers.
With the private sector body only just starting that exercise now, the Chamber chairman said it was important that the Prime Minister’s “narrative” be matched by the figures.
“It certainly wasn’t an overly-optimistic Budget in the sense of tremendous promises,” Mr Bowe told Tribune Business.
“It spoke about some tariff reductions and several initiatives, but it wasn’t one given to any unrealistic expectations, and I think there are some things that are ‘devil in the details’.
“It was not your typical ‘pie in the sky’ communication. It did make reference to the medium term fiscal consolidation plan and commitment to adhere to fiscal prudence.”
Mr Christie’s 2016-2017 Budget tried to strike a balance between being a normal pre-election Budget and maintaining its ongoing fiscal consolidation programme, knowing that the eyes of the International Monetary Fund (IMF) and credit rating agencies are upon the Bahamas.
With this nation’s creditworthiness just ‘one notch’ above so-called ‘junk status’, the Prime Minister tempered the typical ‘pre-election’ tax cut giveaways and spending initiatives, instead focusing on key programmes and touting his government’s major achievements - including the usual litany of foreign direct investment (FDI) projects and job creation supposedly in the pipeline.
“One of the things that did strike we with this Budget was that they were a little constrained in how far they could go,” K P Turnquest, the Opposition’s deputy leader, told Tribune Business.
“The Prime Minister indicated that in the last part of his introduction with his commitment to a fiscal consolidation plan, and that being important as the IMF and rating agencies continue to look.”
Mr Turnquest also queried how the Prime Minister’s move to slash the Bahamas’ economic growth rates, to 0.5 per cent and 1 per cent in 2016 and 2017, respectively, would play into the fiscal projections.
Economic growth is a key driver of the Government’s revenues, yet even with reduced GDP expansion, the Christie administration is forecasting that its income will increase, while spending declines as a percentage of output.
The Government’s direct debt is also predicted to reduce as a percentage of GDP, with Mr Turnquest implying that the fiscal numbers - including a reduced deficit of $100 million, equivalent to 1.1 per cent of GDP, do not tally with the revised economic growth forecasts and may be too optimistic.
Mr Bowe, meanwhile, added: “The [Budget] communication itself is the narrative. As a communication, it certainly was a statement that I say was even keeled and not overly optimistic, and that was the right message at this point in time.
“It certainly didn’t have exaggerated provisions, and from that perspective was at least a step in the right direction. We may find the numbers tell a different picture. We had the right message; let’s make sure we have the right details behind it.”
The Chamber chief added that the “merits” of the Government’s ‘agreement’ with the Chinese for the mobilisation and construction completion of Baha Mar were currently, with much depending on whether it actually resulted in the $3.5 billion project’s opening.
And, while the Government is now forecasting a more moderated fiscal consolidation pace, Mr Bowe said the key was for the Bahamas to remain “on the right trajectory”, with the deficit and national debt both contracting.
He also told Tribune Business that he was particularly interested to see whether the projected $150 million fiscal deficit for 2015-2016 came in on target.
That sum is $9 million higher than the $141 million forecast in last May’s Budget, but some $7 million lower than the $157 million deficit incurred during the 2015-2016 first half to end-December.
Mr Bowe said the Government’s $150 million projection had to be assessed against the unexplained $62.5 million spending increase that was unveiled in the mid-year Budget (some $32 million of that appears to have gone to the Ministry of Tourism for payments to the cruise lines).
He added that it was key to determine how the Government has been able to absorb that spending, but still hit its fiscal targets.
The Christie administration’s projected deficit, equivalent to 1.1 per cent of Bahamian gross domestic product (GDP), is higher than the $70 million or 0.7 per cent that it forecast when delivering the 2015-2016 Budget communication last May.
It is thus projecting a fiscal deficit that is $30 million, or 42.9 per cent, higher than year-before estimates, although Prime Minister Perry Christie asserted that it remained on course to eliminate the GFS deficit during the 2018-2019 fiscal year.
Pointing out that the Government was anticipating a $172 million surplus on its primary balance for 2016-2017, the second consecutive year that it will achieve such an outcome, Mr Christie emphasised: “On the current fiscal track, the GFS deficit will be eliminated in 2018-2019 and a small surplus will be posted.
“The ongoing rise of the Government debt burden will be arrested, and the ratio of debt-to-GDP will decline to 64.1 per cent in 2016-2017, down from the peak of 64.6 per cent in 2015/16. It will fall steadily thereafter to stand in the area of 59 per cent in 2018-2019.”