By KHRISNA RUSSELL
Tribune Chief Reporter
THE government’s finance experts don’t know exactly how the country’s economy will react to global fall out from the coronavirus, but officials are working on several internal models taking into account worst-case scenarios.
According to Financial Secretary Marlon Johnson yesterday, these “what if” scenarios include minimal to drastic changes in the tourism sector.
His comments came after the Central Bank advised Bahamian families to be financially prudent until the uncertainty of the impact of COVID-19 subsides.
“From the Ministry of Finance’s perspective what I can say is that we are doing a number of internal modelling,” Mr Johnson told The Tribune yesterday.
“We are looking at all of the potential scenarios: What happens if there is a total sort of collapse in the tourism trade? What happens if there is a partial (collapse)? What happens if the effects are just modest?
“What we are doing is a series of ‘what if’ scenarios to help give the policy makers some perspective as to what could be lost in terms of tourism dollars inflows and in terms of revenue loss and from that then form the basis of the sort of policy response.
“If it’s mild then the measures you take would be modest. If it gets more significant then it requires a little bit more significant intervention.
“But as to what we will do? That will be something that will come from the policymakers themselves.”
Asked if officials could speculate what the tourism fall out could be, he said they were sure there would be “some impact”.
“We’re looking at it. We’re looking at the modelling. We know that there will be some impact as has been said.
“Persons are reassessing whether they travel. One of the things we are looking to do in our modelling that I think is important to highlight is that our anticipation is that whatever happens we’re looking at in a matter of months as opposed to prolonged over a number of years.
“I think what we have seen is at least from China and some of the other places is that you see a real sharp peak and then you see a fall off in new cases as it subsides. So as in any sort of viral epidemic, our hope is that it’s short-term and not long-term.
“If it’s a matter of months, I think we will see some contraction in the economy but then I think we will round off as all of the projects that are in the pipeline come on stream. So that’s our hope. We are building around an anticipation if it’s short-term.
“Now when we model we also have to model that it’s not short-term, that it is long-term, that it has a long tail as we say and then so we have to take some modelling after that and then that will inform the policy response.”
He said before the COVID-19 outbreak, officials here had forecast some contraction in the economy, but they were still unsure if the virus would exacerbate this shrinkage.
“The truth is that we don’t know. We really don’t know right now. What has been forecasted is a flat or slight contraction in the economy. That’s what the deputy prime minister would have mentioned in his midterm budget speech.
“But for us in our modelling we have to anticipate that given the impact of the coronavirus and given the fact that it may lead to a significant slow down in tourism that we may see an even deeper contraction and so those are the models that we are doing.
“But the truth is we simply don’t know right now. The tourism numbers are remaining healthy for the time being but we have to anticipate that if the coronavirus comes on shore or certainly if it gets worse in Florida and along the eastern seaboard, we could see potential significant contraction. Our hope though again is because it is a viral infection; given the way these things work on a cycle that it will be short-term. It will be months as opposed to a matter of years and I think that’s the best-case scenario that we could hope for,” Mr Johnson said.