By NEIL HARTNELL
Tribune Business Editor
A former finance minister yesterday argued that The Bahamas stood on the threshold of another recession with the coronavirus likely “to knock a few more points of our GDP”.
James Smith, pictured, also an ex-Central Bank governor, told Tribune Business that the Covid-19 outbreak only “adds to the headwinds” The Bahamas is facing post-Dorian having failed to completely recover from the 2008-2009 recession.
Warning that the full impact from the coronavirus has yet to fully work its way through the Bahamian economy, with much depending on the extent of the outbreak, Mr Smith said the effects to-date appeared to be more “subtle” and not as easily visible as in previous external shocks.
“I think it’s going to add to the headwinds we’re already facing in terms of slow growth and the after effects of Dorian,” he told this newspaper. “We have still not emerged completely from the 2008 recession. This is the reason for the high unemployment figures and pretty much flat or negative growth we’ve seen.”
Mr Smith said the reluctance of many persons to travel would impact both stopover and cruise ship tourism, while the supply chains for a country that imports virtually all it consumes have already been disrupted by manufacturing shutdowns and panic buying in major markets such as China and the US.
“The sum total of that could knock a few percentage points off gross domestic product (GDP), which was already under stress,” he added. “It’s not a very happy outlook for us one way or another. The panic has set in, and people are reacting to that by changing their behaviour and buying more. It’s not too comforting an outlook.”
Asked whether the Covid-19 fall-out could tip The Bahamas into a recession, which is defined as two consecutive quarters of economic contraction, Mr Smith replied: “I think we’re already there because the cancellation of rooms and more infrequent cruise ship stops, we’ll see it in the data in the next two to three months but it’s happening now.
“Time lags will come into play, and we’ll see these things work themselves out over the next few weeks and months. I hope it’s not as severe as the outlook indicates, but at the same time we have to expect some negative impact on the economy and decrease in consumption.
“We really have to keep our eye on this one. I have no idea how deep it’s going to be, but most of us will feel it. We should be accustomed to dealing with crisis. We’ve been there, with one now coming right after the other.”
Mr Smith also suggested that The Bahamas had to be “be very careful how we react to this with economic policies” as traditional stimulus methods, such as putting more money in consumers’ hands, was unlikely to have the intended effect due to product shortages and the ongoing uncertainty.