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'Critical Surgery' For Bahamian Economy

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Jeffrey Beckles

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas "must perform critical surgery on our economy" to return to the 3 percent-plus average GDP growth enjoyed pre-recession, the Chamber of Commerce's chief executive said yesterday.

Jeffrey Beckles told Tribune Business that 2018's 1.6 percent real GDP expansion, unveiled by the Department of Statistics on Monday, was "not sustainable" and inadequate to solve The Bahamas' pressing economic and social needs.

He added that the fact it had taken six years to return to 2012's economic output levels "spoke for itself" in terms of highlighting The Bahamas' economic "struggle" over the past decade since the 2008-2009 recession.

Arguing that three consecutive years of 1.6 percent GDP growth "won't do much for us", Mr Beckles said The Bahamas was well "past the time for talking" when it came to implementing real structural reform that removed obstacles to improving the cost and ease of doing business in this nation.

He called for the private sector to lead the charge for higher GDP growth, and warned that "market forces need to be in play" if The Bahamas is to achieve the faster expansion necessary to make a serious dent in the stubborn double-digit unemployment rate.

"The short answer is: 'No'," Mr Beckles replied, when asked if 1.6 percent GDP growth was sufficient to meet The Bahamas' needs. "Anything less than pre-recession growth rates will be a struggle for The Bahamas, and what happened in the last 10 years is trending in the wrong direction.

"The more we struggle to get back to pre-recession, the longer the road is going to be for us. It means that the recovery has been far longer than most of us anticipated. While we're not the only ones recovering, to be in this position where we're still struggling to get 2 percent average growth speaks to the fact we have more to do."

The Department of Statistics data, which took 2012 as its baseline, revealed that it took six years for the Bahamian economy's real GDP output to move beyond the level recorded for that year.

GDP, which measures the total value of goods and services that an economy produced, stood at $10.721bn for 2012. However, this output slumped by more than $300m the following year to $10.404bn as a result of a 3 percent contraction.

The Bahamas spent the next five years regaining this lost output, with real GDP growth rates ranging from a high of 0.7 percent in 2014 to a low of 0.1 percent in 2017. The “major” growth surge came in 2018 as a result of the 1.6 percent expansion, which finally moved real GDP above 2012 levels to $10.763bn.

Last year's improvement was likely driven by Baha Mar's full opening and improved tourism numbers spurred by a rising US economy and consumer/traveller confidence, but Mr Beckles told Tribune Business that The Bahamas could take little comfort from the economy's performance over that period.

"Over that span we can't see that as an improvement," he argued. "Some may see it differently, but if you're comparing 2018 to 2012 levels that makes the point itself. Even if we were to repeat 1.6 percent for the next three years that's not going to do much for us.

"I think it's obvious that we cannot continue to the same things we have been doing. We talk about the need to diversify, make structural changes and reforms. I think we're past the time of talking about these things. We literally have to do critical surgery on our economy, look at what's working and what's not working, and stop doing those things.

"If we're serious about it we have to perform surgery on our economy and cut out those things not helping it, and look at ways to diversify so there can be more activity. Our standpoint is: We've been talking about this for a long time, and have fantastic minds in the country. Let's get them around the table and figure out what it takes to get this economy to move."

The 1.6 percent GDP growth rate unveiled by the Department of Statistics meant The Bahamas missed the 2.3 percent expansion projected by the International Monetary Fund (IMF), together with the Government's own estimates which were in line with that.

The 0.7 percentage point difference is roughly equivalent to a $70m undershoot on the GDP/economic output forecast, and has been seized upon by the Government's political opponents to slam its economic policies and management.

The Government, though, can hit back by arguing that the data shows the economy actually contracted in real terms during the 2012-2017 Christie administration's term in office, with growth never exceeding 0.7 percent.

Mr Beckles said the IMF's growth target was "reasonable", and added: "The truth is we've gone back to the average we had in previous years. If you look at everything, the needle hasn't moved a lot.

"Realistically, I don't think we were in a position to grow much more in 2018. I don't see anything that would have impacted us to move close to 2 percent. That being said, there's a lot to be done to effect that and how we foster more activity on the domestic side.

"We need to let the private sector lead the business sector; policymakers play their role, although we have to be careful to balance the two, and market forces need to be in play in The Bahamas to see the kind of activity we want."

The Oxford Economics report on full World Trade Organisation (WTO) membership's likely impact on The Bahamas, which was commissioned by the Chamber of Commerce, made a similar call for broad-based structural reforms that improved governance and transparency, eliminated bureaucracy and red tape, and boosted the ease - and lowered the cost - of doing business.

It said low growth rates have become the ‘new norm’ for the Bahamian economy, pointing out that average annual GDP expansion between 2011-2017 averaged a mere 0.6 percent. This represented a "marked slowdown" from the 3.1 percent growth rates achieved prior to the 2008-2009 financial crisis.

"Traditional growth engines of tourism and financial services have been struggling and unemployment remains stubbornly high," the report added, despite the double-digit growth in both stopover and total visitor arrivals to The Bahamas during 2018 and 2019 to-date.

Comments

John 3 months, 1 week ago

The bottom line is government sent the economy into hemorrhage by trying to extract too much taxes out in a short period of time. Not only did this place a burden on consumers who were already struggling to survive but businesses that were struggling to keep their head above water went under. Some never resurfaced. And many who had plans to start businesses Pluto their plans on hold or scaled them down. It is mostly food (wholesale retail and fast food) that is keeping the local economy going (and web shops) Every thing else is in a worse position than it was two years ago. And despite government reducing tariffs of vehicles, the market still prefers the used Japanese imports compared to shopping at the local car lots. A 12% vat charged on top of average 25% customs duties is not sustainable.

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realitycheck242 3 months, 1 week ago

The new providence road improvement program caused many businesses to fail and some have never restarted because of the recession.It may not have been as bad but the change in direction for traffic on Blue hill road, market street and even bay street east of east street along with popularity of the marathon mall can all be to blame. A good incentive for the economy would be for the government to reduce tarriffs on all imported cars to 10% in the upcomming budget but the motor dealers associations will cry foul as they seek to protect their bottom line.Small bussiness developement is going to be the key for continued growth because the likes of Baha Mar will now come around any time soon.

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John 3 months, 1 week ago

It will bi interesting to see the effects of both the increases in tariffs by Trump in China imports and vice versa on US exports going to China. Of course it has already caused a slowing in both economies. If The Bahamas is able to import goods directly from China and avoid US tariffs on these goods then prices of these items will be equal to US prices. So it wouldn’t be feasible for Bahamians to travel to Miami or New York to shop ( for Chinese products). But of course Trump says many of these products will now be made in the US (air talk at least in the short term). And if Schindler reduces its imports of America goods, the prices of these goods will naturally fall. But, of course Trump says he will not allow that to happen. The (US) government will buy up the excess, especially agricultural products and give them to poor (shithole) countries like Haiti. But Trump is also putting sanctions on oil from Venezuela and Iraq/Iran which will drive up the price of fuel.

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realitycheck242 3 months, 1 week ago

From a touristic point of view the Bahamas will be affected by the trump tarrif increases on Chinese made products, American citizens will have on average $2500 less in disposable. income in their pockets so travel will be less of a priority. If the Iranian situation gets out of hand and war breaks out, every country economy will be affected negatively. With all the fire power trump is sending to the middle east anything is possible.

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John 3 months, 1 week ago

Most people making $16, 000 in the US do not travel to the Bahamas so that argument is wrong. The Bahamas has had an upsurge in upscale tourist who will not Trump tariffs stop them from traveling especially since they are most likely benefiting from his tax cuts. And if war breaks the Bahamas may benefit from persons who still want to travel but still want to be close to home. And there will also be those Americans who will fear a missleor surprise attack so they will leave the US mainland. And with the build up of military weapons in Venezuela this is more likely than if the US was only at war in Iran or Iraq. The other big boys Russia and China will seek to engagebut the Bible says the African will not be with America in the third way war.

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TheMadHatter 3 months, 1 week ago

Mr. Beckles - good stuff. You are another one whose IQ is too high to remain here. I have no doubt they will be shipping you out shortly.

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John 3 months, 1 week ago

Donald Trump for prime minister

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