By YOURI KEMP
Tribune Business Reporter
A leading banker believes global growth projections mean nothing for The Bahamas and we should concentrate instead on the tour core tourism market of America.
Gowon Bowe, Fidelity Bank (Bahamas) chief executive, told Tribune Business that growth projections by the International Monetary Fund (IMF) are not what local businesses should focus on.
He was responding to reports that the IMF has upgraded their global growth forecast to six percent from 5.5 percent.
“I think it’s important that we appreciate that whilst we are an open economy – and so therefore, global growth is a positive contributor for us – we are also very concentrated in very specific markets where growth will have the greatest impact for us,” he said.
“Understanding our primary industry being tourism, our principal markets are North America, and so as it relates to global growth that includes both the developed countries, as well as developing and emerging economies. Sometimes you will find growth in India, China and Japan doesn’t have a necessary immediate contribution to the Bahamas, simply because our ability to take advantage of their markets is limited by the fact that we don’t have significant trade.”
Earlier this week the IMF upgraded their global growth forecast for 2021 from 5.5 percent to six percent, so also has the US economy, growing at 6.4 percent for 2021.
While acknowledging the IMF forecast for the US economy, Mr Bowe warned: “I think it is important to remember that it started at what base? Sometimes we look at these percentages because we haven’t seen these types of growth rates since the recession in most economies out of the BRIC’s (Brazil, Russia, India and China) and the reason why we are going to see that level of growth is because the significant contraction that has taken place.”
“So, if we put it into global terms where they were estimating anywhere between eight and 10 percent global GDP contraction, then you’re starting from a much lower base.
“If you think about it using easy numbers, if I’m looking at $10bn as my starting point, and I lose a $1bn, when I get to $9bn - even if I grow at 10 percent - I’m still not back at where I was pre COVID-19.”
The contraction was significantly deeper than the growth projections, argued Mr Bowe who also cautioned that the recovery is “not as exuberant” as the rates may project because it does not get the world back to where it was before within a year. “We lost 10 percent in a year, but we didn’t gain it back in a year,” said Mr Bowe.
Calling for more sustainable growth rates over the long term, Mr Bowe said: “We wouldn’t expect to recover as quickly. What would be disheartening is if they were projecting the growth rates would be a lot slower, because given that we started from a much smaller base you will hope that the growth rates are larger so that we want to get back to normal and then start to see growth thereafter.”
He added: “There are three levels to the growth we want o see. The first is we want to see positive growth; we don’t want to see contraction. Secondly, we want to see growth at a rate that allows us to get back to pre-pandemic levels in the shortest time frame – most predictions are that it will take about two years or 18 months to two years. Then you want to see stable growth, after you’ve come back to pre-pandemic levels, which will then say we’ve caught up and now moving forward.
“So really, the growth projections from the IMF report are positive news, meaning that they are seeing signs that the economy of the world are starting to move forward and starting to move forward at a pace that is meaningful. But it doesn’t mean that it is going to recover all it has lost in a short period of time. Take a bit at a time.
“Like I said for the Bahamas what is more important is to look at those markets that it has its greatest trade, and the greatest trade is North America because of tourism which is 50 to 60 percent of our GDP.”