The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

A National Insurance Board (NIB) executive says an increase in unemployment benefit applications shows “all is not well” with the Bahamian economy, with new contributors to the social security scheme declining.

Phaedra Mackey-Knowles, NIB’s vice-president of investments, told a Chartered Financial Analyst (CFA) Society of the Bahamas forum that key economic indicators were currently moving in the wrong direction.

She said NIB had seen an increase in the number of Bahamians qualifying for unemployment benefits, while there were fewer persons coming into the job market.

   Mrs Mackey-Knowles said there had also been a decline in new employers registering with NIB, particularly in the self-employed segment.

“Those few indicators give me a read on how the economy is,” she said. “Most recently, we transitioned to a new IT platform. There was a delay in some of the benefit payments, and the outcry it caused was indicative of how the economy is doing.

“I have had persons come up to me and tell me that that was their only source of revenue, and if we miss one payment it affects them tremendously.

“That tells me that our economy is really, really bad. There is low growth expected even with the opening of Baha Mar, and that trickle down is going to take a while. When you see persons coming in for benefits they are at their lowest point.”

Mrs Mackey-Knowles’ comments are unlikely to please the Christie administration, as they come in the middle of an election campaign where it has been touting a rosy economic outlook, especially with Baha Mar’s imminent opening.

They are also likely to be seized on with relish by the Opposition parties as evidence that the Bahamian economy is much weaker than the Government is letting on.

Meanwhile, Mrs Mackey-Knowles said the Central Bank’s 50 basis point interest rate cut, designed to tackle anemic economic growth, had affected NIB’s investment portfolio, as the returns/yields on the majority of its bank and securities instruments were tied to the Prime rate.

“About 65 per cent of my portfolio is currently invested in government debt,” she said. “Whenever there is a reduction in interest rates it affects my portfolio and your future benefits because we are tied to Prime.

“On  the flip side, I can see the Government’s reasoning for lowering the Prime rate. They can’t control the external borrowings but they can control the internal borrowings. Due to the recent downgrade, they have to lower the cost of borrowing.”

The Central Bank said the 0.5 percentage point cut to its Discount Rate, which is the rate at which it lends to the private commercial banks, was designed to spark more private sector/business investment ahead of Baha Mar’s opening.