By NEIL HARTNELL
Tribune Business Editor
The Bahamas’ ranking as the world’s sixth most expensive nation to live in highlights “a fundamental challenge related to the country’s economic viability”, it was argued last night.
Matt Aubry, the Organisation for Responsible Governance’s (ORG) executive director, said the findings by CEOWORLD magazine exposed the “tremendous” burden imposed on lower income Bahamians by the ever-increasing cost of living and growing “wealth disparity” between rich and poor.
He told Tribune Business that many households and small businesses were “struggling to manage” in this environment, and having to be “super stringent with their money” to make ends meet, thereby acting as a further drag on economic growth.
The ORG executive spoke out after the magazine’s survey ranked The Bahamas behind just Switzerland, the world leader, and Norway, Iceland, Japan and Denmark, making it the world’s sixth most expensive country to live in and the highest-cost destination in the Western Hemisphere.
The survey, which uses New York as the baseline benchmark to compare all countries to, based its assessment on five metrics including the cost of living; rent; groceries; eating out; and purchasing power.
To assess these metrics, the magazine looked at consumer prices indexes and cost of living studies from 132 nations, as well as publicly-available data that measured every-day costs such as accommodation; clothing; taxi fares; utility; internet; the price of groceries; transport; and eating out.
The Bahamas scored a combined 82.51 points in its “cost of living” rankings, rating especially highly on restaurant costs at 83.66 - a result that may have been aided by the inclusion of the automatic 15 percent gratuity. It also achieved a 62.65 score in the groceries cost index.
While rent costs in The Bahamas received a relatively low score of 36.36, this jumped to 60.43 when added to the magazine’s cost of living index. And it scored just 54.18 for “local purchasing power, the third lowest mark among the 20 most expensive countries. This indicates that many Bahamians are struggling to keep up with rising living costs.
The survey’s findings will come as little surprise to many observers given that The Bahamas has long been known as, and perceived as, an expensive destination due in large part to its import dependency and regressive taxation system that focuses primarily on taxing the cost of living through VAT and import tariffs/Excise Tax.
Mr Aubry, recalling a previous survey that described The Bahamas as 40 percent more expensive than the average US city, said of the latest findings: “I think that’s a fundamental challenge related to the economic viability of The Bahamas.
“The cost of living is tremendously challenging in an environment where we see a growing expanse between those that have and those that do not in terms of wealth disparity. It particularly affects those on the bottom scale of that. What we’ve seen is the every day Bahamian struggling to manage in this condition, and that’s challenging from a growth perspective.
“The type of financial behaviours required from every-day citizens and small businesses are that they have to be super-stringent in how they manage their money.”
Mr Aubry said high living costs frequently meant small businesses required extra capital to purchase essential goods and services, forcing them to take on and maintain higher levels of risk than they would otherwise.
He added that the current system typically provides “more opportunity” to those with existing wealth than those without it, with a more productive workforce also being key to reducing living costs.
Sir Franklyn Wilson, the Arawak Homes and Sunshine Holdings chairman, told Tribune Business that the survey’s findings highlighted the competitiveness issues high cost bases cause for destinations such as The Bahamas.
Yet while this meant the country was “non-competitive on price” with Caribbean rivals, he added that it had helped focus The Bahamas on the high-end clients that form its core tourism and financial services business.
“The implications are obviously not helpful,” Sir Franklyn said of the survey findings, “to the extent that we have got to be competitive in a global marketplace. The fact of the matter is there are a lot of people in the world who cannot afford to be going to a place that’s ranked the sixth most expensive in the world.”
He added, though, that there were “two sides to the story” as The Bahamas’ high living costs had positioned it at the ultra-luxury segment of the resort market with products such as Atlantis, Baha Mar, Albany and Baker’s Bay. “It’s not just about moaning, groaning and critiquing it,” Sir Franklyn said.
Still, he acknowledged that the survey findings pointed to the growing gap between rich and poor in The Bahamas. “I can tell you from being in the housing business that the percentage of the population that can afford to buy a house is shrinking,” Sir Franklyn told Tribune Business. “There may be a number of reasons for that, but there are some real issues. That’s the way it is.”