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Turnquest: Recovery To Be Slow And Anaemic

Finance Minister Peter Turnquest.

Finance Minister Peter Turnquest.

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government has not used all the economic stimulus tools available to it, the deputy prime minister revealed last night, having kept some in reserve in case the COVID-19 pandemic is "prolonged".

K Peter Turnquest, in a messaged reply to Tribune Business inquiries, warned that the Government will have to make "additional interventions to jumpstart the economy" once major tourist markets such as the US, Canada and Europe stabilise and the outbreak is brought under control.

He also urged Bahamians to brace for the fact that economic recovery will likely be "slow and anemic", rather than an immediate bounce back, with the "tail end" of the pandemic taking a long time to ease.

Confirming that the Government has additional stimulus ammunition in its arsenal, besides the International Monetary Fund's (IMF) $200m Rapid Credit Facility, that it has yet to fire, Mr Turnquest declined to detail what is available to it.

"It's important that we keep those in the event this crisis is prolonged," he told this newspaper. "Additionally, we can reasonably expect that the tail of this crisis, once it subsides, will be long and the recovery will be slow and anemic.

"We will need additional interventions to jump-start the economy once our source markets are stabilised." Mr Turnquest, while not revealing all the cards in his hand, effectively confirmed that the $20m small business loan support initiative - and expansion of the unemployment benefit safety net to cover self-employed and temporarily laid-off workers - are just the first salvo in the Government's plans.

Many observers believe it needs to do much more, involving hundreds of millions, if not billions, of dollars in stimulus to prevent the Bahamian economy's collapse at a time when it has lost a tourism industry that generates more than 40 percent of its annual economic output and up to 50 percent of total employment.

While The Bahamas will never come near to matching them, the US is trying to stitch together a $1 trillion stimulus package while the UK is providing £330bn in financial support to its own small business community.

James Smith, former minister of state for finance, yesterday suggested that The Bahamas had always known about its vulnerability to a total travel and tourism shutdown but had never wanted to confront this reality or reduce its dependency on a single industry and one source market (the US) for 85 percent of its visitors.

He warned that the weekend's wave of resort closure announcements, and temporary industry lay-offs, could drive The Bahamas' national jobless rate as high as 30 percent with gross domestic product (GDP) dropping as much as 10-20 percent below forecast by June 2020.

"I think it's one we always knew was there way down inside, but we never wanted to look at it," he told Tribune Business. "In our case, 100 percent of our room capacity is off-line for at least a month.

"Our largest employer is the Government, with 25,000 workers, and our labour force is about 180,000 to 200,000 workers. In that labour force the tourism sector, directly and indirectly, may be about 50 percent. Back of the envelope, you could get maybe 60,000 workers or one-third of your labour force out of work.

"You could look at an unemployment level approaching 30 percent or in the high 20 percents. That's the immediate impact in the next month or so. I don't think we figured that the hotels would immediately close down. You can understand why, but it's almost without notice."

Mr Smith added the tourism sector's shutdown, and resulting unemployment and reduced spending power, would depress aggregate demand in an economy where consumer spending generates up to 70 percent of total economic activity.

"There are other parts of the community that depend on their [tourism workers] expenditure, Mom and Pop stores and small outlets," he said. "It's going to be pretty tough. That kind of creeps through the economy in a very insidious kind of way. It's a multiplier effect."

As for GDP, Mr Smith said: "We're just about at the end of the first quarter, and the original projection was for flat to negative growth this year. That was before the virus, and if we project another three months to half a year and more with the virus, between now and June it will shave 10 percent off GDP in terms of lost income.

"The US is predicting at least 20 percent for them, and we tend to follow the US rate closely. We'll take an unprecedented hit, exceeding any of the other crises we've been through, I think.

"We always have to bear in mind that at least 20 percent of the economy has not rebounded from Dorian, Grand Bahama and Abaco, so they're not making much contribution to GDP. The impact is 10 percent at a minimum, but it could go as high as 20 percent."

Comments

DWW 7 months, 1 week ago

its going to be 6 months or longer, and then we will have another flu season kick in.

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observer2 7 months, 1 week ago

DWW, don't forget hurricane season starts in June.

What if Nassau takes a direct hurricane hit which takes out all the BEC electrical poles like in Abaco?

I don't normally agree with much Smithee says but I agree with him 100% that "The Bahamas had always known about its vulnerability to a total travel and tourism shutdown but had never wanted to confront this reality".

I hear zero conversation on how we will reduce our dependency on tourism, fossil fuels, decentralize to family islands, promote small foot print tourist projects, open up markets to foreign competition (like the food stores), reduce the size of government, real privatization etc etc.

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Well_mudda_take_sic 7 months, 1 week ago

Think much, much longer than 6 months......think in terms of years. Public health officials and the traveling public (vacationers) around the world have finally woken up to the serious health risks posed by the inherent filthiness of the huge floating hotels operated by the cruise line companies. These very greedy companies simply could not resist building bigger and bigger ships in recent decades. In their quest for greater and greater profits, the cruise line companies transformed their business model into one which put their profits ahead of passenger safety.

The monstrous ships must be at sea loaded with passengers for a minimum number of days each year in order to generate the great profits expected from their operation. But this necessarily means less time in port for proper intensive cleaning which in turn means they quickly become filthy incubators of all kinds of pathogens as evidenced by the many norovirus outbreaks on board them in recent years. They may look clean to the passenger's naked eye, but under a microscope the worst kinds of dastardly microbes and frightening pathogens are all too easily found everywhere. The time in port that it would take to intensively clean these gigantic ships would render them unprofitable to operate. Bottom line - they are much too big to be kept clean and still be operated profitably. That's the conondrum, plain and simple.

The travelling public and governments all around the world will no longer be supporting the very unsafe business model of these monstrous filthy floating hotels now that it's well known they serve as the ideal breeding ground for deadly pathogens like the Red China Virus.

And to think the Minnis-led government foolishly worked overtime putting all of our country's fragile economic eggs in the cruise line basket, the bottom of which has now dropped out for the likes of Royal Caribbean, Carnival and Disney thanks to the Red China Virus. The inability to govern resulted in the low hanging fruit be picked by Minnis, D'Aguilar and Turnquest rather than any serious effort aimed at desperately needed economic diversification.

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Chucky 7 months, 1 week ago

Verbal diarrhoea, that’s all you’re spewing!

It’s empirically provable that economies of scale are more profitable and easier to maintain. A fools argument to suggest that it’s easier to clean 10 ships of 500 capacity than one ship with a capacity of 5000.

Think of the stupidity in what you are saying!

Do you suggest that having port facilities to dock 10 ships of 500 people capacity rather than one slip to dock a 5000 passenger vessel will facilitate better resource allocation for cleaning and maintenance

Everything works better with scale.

Can 10 Caribbean islands better maintain the power plants than one large state.

Give one example where smaller scale provides better results in any circumstance?

You are full of crap!

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Bobsyeruncle 7 months, 1 week ago

Agreed ! He obviously has no conception regarding the benefits of economy of scale. The overall carbon footprint of a large cruise ship is significantly less than that of several smaller ones

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Well_mudda_take_sic 7 months, 1 week ago

I will leave it for you and @Chucky to explain why Airbus was recently forced to cease production of the A380, the largest passenger aircraft in the world. Bigger just doesn't always mean better or lead to economies of scale. I can think of countless other similar examples that defy your silly belief that bigger always produces economies of scale; but, frankly, I don't see it as my mission to do your homework.

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DDK 7 months, 1 week ago

Mudda, so right on concerning those nasty monstrosities.

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ThisIsOurs 7 months, 1 week ago

"You could look at an unemployment level approaching 30 percent or in the high 20 percents"

think that number is way low. If a business doesn't have customers with or willing to spend money it has to let go staff too. If investors are selling off stock how will the offshore banks survive? But who really knows the future

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