The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government is anxious to avoid a ‘Grand Lucayan repeat’ in Nassau following the passage of Hurricane Irma, the Deputy Prime Minister said yesterday.

K P Turnquest told Tribune Business that Freeport’s woes had shown how important it was to ensure key assets, which drive the economy, re-open promptly following passage of a major storm.

He added that the loss of economic activity and jobs stemming from the Grand Lucayan’s closure, and subsequent Memories pull-out, and hit to the Government’s tax revenues had a greater long-term impact than immediate restoration costs.

“We have a significant storm,” the Deputy Prime Minister said of Irma’s potential fiscal impact, “and it’s not only the cost of restoration and recovery.

“It’s the loss of revenue as a result of any exigency Orders (tax exemptions) that have to be granted, as well as disruption to economic flows so, yes, we’re very concerned but hoping for the best.”

Then, referring to the Grand Lucayan’s closure, he added: “We’ve seen what happened to Grand Bahama with disruption to economic flows, and have not recovered from that as yet.

“This [Irma] could serve to be a further setback in that regard, and we certainly do not want to see that here in the capital. We have to be concerned about every driver of the economy, and that this storm has no economic effects.

“You’re talking about the loss of tax revenues from there, but also jobs and employment for citizens.”

New Providence’s main ‘economic drivers’, as was the case in Freeport, are its hotel and tourism plant - especially the ‘mega destination’ resorts of Atlantis and Baha Mar. Other properties, such as the British Colonial Hilton, as well as the Breezes and Sandals all-inclusives, are also key assets whose loss for any length of time would be especially damaging.

Financial services, construction, real estate, retail/wholesale are also important industries, and all are concentrated in Nassau, which is home to two-thirds of the Bahamian population.

The loss of both the Royal Oasis in 2004, and the Grand Lucayan last year in Hurricane Matthew’s wake, is likely preying on the minds of Mr Turnquest and other Grand Bahama residents. The island has never fully recovered from the first resort closure, and many view the Grand Lucayan impasse as a repeat of that situation.

Mr Turnquest, meanwhile, said the Government’s response to Hurricane Irene will be “as efficient as possible” given the potential implications for its fiscal projections and the Bahamas’ sovereign credit rating.

Moody’s has given the Minnis administration 12-18 months to demonstrate it can execute effectively on its fiscal consolidation plan, and referred specifically to the Bahamas’ exposure to major hurricanes in placing a ‘negative’ outlook on this nation.

“The negative outlook reflects potential downside risks to the fiscal consolidation process posed by weaker-than-expected growth, exposure to climate-related shocks in the form of hurricanes, and implementation risks associated with measures to rein in expenditure growth and enhance revenues,” said Moody’s. “Absent successful fiscal consolidation, the Bahamas’ fiscal and credit profile would likely weaken.”

“They did indicate that was a distinct risk,” Mr Turnquest agreed. “We certainly understand that. Unfortunately, there’s nothing we can do about it. It’s out of our control.

“Be that as it may, we intend to control and step up our mitigation efforts in the event we do have significant exposure. Even as we prepare for Hurricane Irma, we are being as efficient as possible and will continue that through, if and when we have to do reconstruction.”

The Minnis administration has projected a $323 million fiscal deficit for the 2017-2018 Budget year, but had been hoping to slash this via a package of austerity measures headed by a 10 per cent “across-the-board” cut to its $2.67 billion recurrent spending estimates.

Moody’s revealed that these measures are intended to slash spending by $100 million, a sum equivalent to 1.1 per cent of GDP, and could reduce the deficit to 2.8 per cent of economic output.

With Irma threatening to blow a hole in this forecast, Mr Turnquest said the Government would first implement “further spending controls” and seek to repurpose funding from other areas in the Budget to finance reconstruction efforts.

“We’ll see what happens,” he told Tribune Business, “but if the need arises we will look at further expenditure controls in the first instance. If the need arises we will look at further borrowing, but that will be done in conjunction with further mitigation efforts.”

The cost and scale of any reconstruction efforts, Mr Turnquest acknowledged, will depend on Irma’s strength and the Bahamian islands it strikes. While the Category Five storm’s forecast track appeared to spare New Providence the worst, it takes the storm close to islands such as Grand Bahama, Bimini and Andros.

He confirmed that the Government expected to receive an insurance payout from the Caribbean Catastrophe Risk Insurance Facility (CCRIF) “in the worst case scenario”, should Irma hit the Bahamas’ most-populated islands and damage public infrastructure.