By NEIL HARTNELL
Tribune Business Editor
The Bahamas must “challenge itself” to achieve higher GDP growth rates than the 2.1 percent expansion projected for 2019, the Chamber of Commerce’s chief executive has urged.
Jeffrey Beckles, speaking after the International Monetary Fund’s (IMF) statement on its recent Article IV visit to The Bahamas, told Tribune Business that this nation needed to “capitalise” on current “double-digit” stopover tourism increases to both maintain this momentum and turn recent arrivals into repeat visitors.
Explaining that this would help insulate The Bahamas’ from the US economic slowdown that some experts predict will occur as early as 2020, Mr Beckles added that The Bahamas needed to fix its structural weaknesses and bottlenecks regardless of whether it became a full World Trade Organisation (WTO) member.
The IMF’s report said addressing these long-standing concerns had become more important than ever as a result of the WTO accession, but the Chamber chief warned it would be “a huge mistake” for The Bahamas to view much-needed taxation and other reforms this way.
He argued that changes needed to be made for Bahamians’ own benefit, and pointed out that even if this nation dropped its accession plans tomorrow it would still find itself “in the same predicament” with businesses, entrepreneurs and job creation constrained by structural impediments.
“It’s not earth-shattering,” Mr Beckles said of the IMF’s conclusions. “A lot of the issues they’ve identified are issues we’ve been speaking to for quite some time. We’re happy to see the way they’ve put this in context for what provides us with a step-by-step list of things to do.
“But we have to make sure we have a concerted effort in not settling for this growth. We have to work hand-in-hand with the Government - the private sector - to improve these growth projections.
“Despite the fact these two economies [the US and China] are projected to slowdown, there are some things we can do better. We have to challenge ourselves to find a way to improve on that.”
The IMF, in its Article IV assessment, maintained its expectations of 2.1 percent growth for the Bahamian economy in 2019 despite acknowledging the uncertainty clouding the world’s short-term economic performance. This follows on from a projected 2.3 percent GDP expansion in 2018, aided by Baha Mar’s full opening.
However, the Fund is forecasting that The Bahamas’ economic growth rate will drop to 1.6 percent by 2020, and then revert to its long-run average of 1.5 percent over the medium term. To improve on these forecasts, Mr Beckles said the nation needed to better understand what was fuelling the present tourism growth beyond Baha Mar and the US economy.
Suggesting other factors were in play, he added: “The uptick in tourism and spending is all good, but we know with the slowdown of the US economy that the net effect of that could see us slowdown a bit.
“We need to understand why the uptick occurred. It can’t just be because the US economy is doing well. We could encourage a lot of those people to return if we’re doing this right. Where’s the growth coming from? What can we capitalise on to encourage those people to return?”
Similarly, Mr Beckles said The Bahamas needed to enhance its economic competitiveness for its own sake rather than purely as a response to becoming a full WTO member.
“Addressing structural impediments and preparing the economy for a further gradual opening is critical,” the IMF had urged. “Several steps have been taken to address long-standing structural issues, boost private investment, and lower the cost of doing business.
“Planned accession to the World Trade Organization (WTO) makes it even more urgent to tackle remaining impediments. Lowering energy costs, improving private sector credit access, and tackling skills mismatches in the labour market are critical priorities.”
Yet Mr Beckles told Tribune Business: “Whether or not we join the WTO, and Bahamians need to appreciate this, the structural weaknesses we have in existence - they don’t exist because of the WTO.
“Whether or not we join the WTO these system weaknesses are a real drag to growth and we have to address it whether we join WTO or not. It’s a natural investment and economic growth inhibitor. We have to find a way to tackle these impediments and fix them in the context of improving The Bahamas.
“WTO will not fix access to capital,” the Chamber chief continued. “We need to fix it ourselves. One of the reasons GDP is not moving is there is very little activity in the domestic sector, and one of the causes of that is domestic entities do not have access to capital.
“The Bahamas needs to look at itself as a country that needs to fix these identified weaknesses. The prism of why we need to fix it should not be seen through the WTO. If we do that we will make a huge mistake. If we dropped the WTO accession today the country will be in the same predicament.”
Mr Beckles backed the Government’s move to create a Disaster Relief Fund using dormant account monies, as well as arranging a $100m contingency financing line from the Inter-American Development Bank (IDB) and insurance from the Caribbean Catastrophe Risk Insurance Facility (CCRIF).
“We cannot pick up and move The Bahamas,” he said. “It’s a positive step that the Government started this Disaster Fund and took advantage of funding through the IDB.
“A valuable lesson from our neighbours in Puerto Rico was learnt about the ability of a country to get back up and running once it was hit by disaster. Look at how long it’s taken them to recover and get back to normalcy. Our economy cannot afford to be off-line for any period of time.”