By NEIL HARTNELL
Tribune Business Editor
Governance reformers yesterday hailed the government’s prediction that it will shrug off a $185m revenue shortfall - and beat its full-year deficit target - as “phenomenal” if it comes true.
Robert Myers, the Organisation for Responsible Governance’s (ORG) principal, told Tribune Business that the Minnis administration would set the Bahamian economy on course for “a massive” boost if it hits its 2018-2019 fiscal goals.
Reacting after KP Turnquest, the deputy prime minister, projected that the full-year deficit is on track to come in between $5m-$10m below its $237.6m target, Mr Myers conceded it was “a big under-forecast” if revenues come in seven percent below the initial $2.649bn projection.
Mr Turnquest, though, said the revenue shortfall will be offset through “significant expenditure restraint” that will cut the Government’s fixed costs by $130m or 5 percent compared to budget projections, enabling it to maintain a recurrent surplus.
Mr Myers praised such cut backs, in the face of revenue shortages, as “the responsible and accountable thing to do” in preventing the addition of further “red ink” to the already $8bn-plus national debt.
Acknowledging that “you’re not going to build Rome overnight”, the ORG chief said the Government now needed to both deliver on its 2018-2019 targets and convert this into a “sustainable trajectory” over the next three to four years.
Doing so, Mr Myers added, would revive trust in the Government’s fiscal management and create the “massive increase in consumer, investor and business confidence” required to drive higher Bahamian gross domestic product (GDP) growth and end double-digit unemployment.
Already seeing positive signs, Mr Myers revealed that he is “walking the walk” by taking the risk of incorporating a new business within the past week. “I don’t do that if we’re going south; only if we’re going north,” he told Tribune Business.
Describing Mr Turnquest’s deficit-beating expectation as “very encouraging”, the ORG chief said the explanation provided for the major revenue shortfall was credible.
The deputy prime minister blamed the under-performance on a combination of VAT lags, the web shop taxation settlement and delayed creation of a Revenue Enhancement Unit that was projected to generate $80m this fiscal year.
Mr Myers said the VAT transition periods granted to the hotel and construction industries, in particular, so that reservations and contracts in existence prior to last May’s budget could be honoured at the old 7.5 percent rate would have had a “significant” impact.
“It’s not small numbers,” he said. “From 7.5 percent to 12 percent, that 4.5 percentage points is not a small number when you look at the balance of work remaining on those contracts. When I think about hotels and construction they’re easily in the top three industries in the country.
“You’re always going to have shortfalls in budgeted revenue. You’re taking your best crack at it in the Budget. You’re taking your best guess-estimate. What’s important is to be responsible and accountable enough when you see that shortfall. When there’s a shortfall in revenue you’ve got to cut back on expenditure; that’s the responsible and accountable thing to do. They’re doing that.”
Voicing optimism that the Government is in the early stages of placing the public finances on “a great trajectory”, Mr Myers added: “You’re not going to build Rome overnight; it takes time.
“You’ve now got to do this sustainably over the next three-four years, and you will see a massive increase in investor confidence and business confidence. If we can sustain that trajectory and results over a sustained period of time you’re going to have a very positive effect on confidence.
“Obviously you want to eliminate the deficit altogether, but if you can keep beating these targets and get more accountability from the public sector, lowering the deficit and continuing to lower the deficit, you’re making progress.”
Mr Turnquest yesterday said 2019 and last year marked the first time in 12 years that The Bahamas is projected to enjoy consecutive years of GDP growth higher than 2 percent.
Concurring, Mr Myers added: “If you look at the last 10 years we’ve had indicators going in the wrong direction, and now we have indicators in the right direction. It’s a good thing; it’s taken time, and it’s positive. If we improve these things you will see a rising tide lifts all boats.
“If we increase efficiency and accountability within government; reduce the deficit and balance the budget; get rid of loss-making state-owned enterprises (SOEs); get rid of tax cheats, investor and business confidence are only going to increase and that’s how you get economic growth.
“These things are explicitly linked. That’s how you get GDP growth, and that’s going to help everybody. If, over the next 10 years, we move to annual GDP growth of 5-5.5 percent we are rocking and rolling. It may take that long, but that’s the right trajectory. These little signs are so important that we get it right and move in the right direction.”
Mr Myers argued that such positive messages would be picked up by the likes of the International Monetary Fund (IMF), Inter-American Development Bank (IDB), World Bank and the credit rating agencies, further bolstering confidence in the Bahamas and its fiscal and economic prospects.
“When that confidence comes in, that’s what will pole vault you out of this negative trajectory,” he told Tribune Business. “We get this right and we can easily move from 2.1-2.3 percent growth to 3 percent in a year; a whole one percentage point increase in GDP just because business, consumer and investor confidence has improved so much.
“People realise they can do business efficiently and effectively in this country. One or two large projects will make a massive difference and local businesses feed off that. People start spending their money, take it off fixed deposit and start training and hiring people, bringing in more goods.
“They get excited about that coming growth. Good news feeds off good news. People get excited about that and look for ways to invest. I’m walking the walk. I see positive signs and have said: OK, I can look at this business. I just incorporated a business last week, another one. I don’t do that if things are going south; only if they’re going north,” Mr Myers continued.
“If the signs are going north I invest in opportunity and growth. If they’re going south, I’m not doing anything. If they’re being fiscally irresponsible, what the hell? I’m not going to throw good money after bad.
“That’s why it’s important to have transparency, accountability and get rid of corruption because it does make a difference to investors like myself and consumers. You’re not going to buy a home, build a home, buy a car, build a home extension if you think the economy is going to collapse.”