The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

The Central Bank’s governor yesterday said there was “not much joy” in The Bahamas’ medium-term growth projections, and called for more focus on “improving” the country’s GDP potential.

John Rolle said that while the economy was currently benefiting from a strong tourism industry performance, it could not afford to ignore forecasts that its medium and long-term GDP growth will dip from 2019’s projected 2.1 percent to an average around 1.5 percent.

“The economy is strong,” Mr Rolle said. “You’re working with what you got. You want much more. To see a 20-something percent jump in estimated revenue from the tourism sector, that’s happening because we just had a huge amount of rooms added, and because there is a take-off in interest in vacation rentals.

“To continuously see that kind of growth would mean someone is continuing to add a large amount of capacity. You’re adding the airlift and you’re having the port facilities to keep up with the traffic volumes.”

Yet he added: “Based on how the infrastructure is set today, everything that we look at says once you’ve gotten over this adjustment you’re growth rate is averaging slightly below the two percent range. By most measures that’s not considered a satisfactory or pleasing projection for The Bahamas.

“In terms of our growth potential I think there is not much joy or thrill in The Bahamas. In terms of where we are today, the transition that is happening in the economy is a very strong transition because of the momentum from tourism.

“The longer and medium term focus really is to make certain that that 1.5 percent potential growth improve, which means that on a yearly basis you’re looking at either investments or ways of being productive that are generating good revenue growth.”

When asked about the government’s nine-month “fiscal snapshot, and VAT revenue yield for the year-to-date, Mr Rolle said: “I’m not concerned so much about how the economy adjusts in the very near term when the government makes adjustments in its policies.

“What is more important is what the adjustments mean for the economy three, five and ten years out. When you increase taxes, by definition there is going to be some adjustments in demand, but if it is being carried in the context where other forces and momentum are propelling the economy higher, those will dominate eventually.”

The Central Bank governor added: “We also expect that the sort of improved health in the public finances is going to have its own set of benefits and rewards. What we have to always appreciate in The Bahamas is that some difficulties that exist, there are some painful measures and there are many more tough decisions from a policy point of view that might come up.

“In all of those cases you would find that once you make the decision there may be a bit of an adjustment upfront that gives you sort of a mixed message.”