The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Central Bank’s governor yesterday adjusted 2022 economic growth projections to 6-8 percent, with The Bahamas not expected to “fully erase” COVID’s impact before 2023 “at the earliest”.

John Rolle, speaking as the Central Bank unveiled its 2021 third quarter economic update, said that while this nation was enjoying “a steady but paced recovery” from the pandemic its rebound was nevertheless likely to be “drawn out” given the virus’ impact on its key tourism source markets.

While the Central Bank and International Monetary Fund (IMF) had previously forecast that The Bahamas would enjoy 8 percent gross domestic product (GDP) expansion in 2022 as the full impact of tourism’s rebound kicked in, Mr Rolle yesterday hinted at a slightly less optimistic outlook by giving a range between 6 percent to 8 percent.

“On the upside, tourism is positioned to record full calendar year business in 2022. This, combined with continued recovery in occupancy rates and the return-to-use of residual room inventory, will generate forecasted economic growth for 2022 anywhere between 6 percent and 8 percent,” the Central Bank governor said yesterday.

“It will allow for much needed return of employment in the sector, and downstream improvement in other parts of the private sector and in public finances. The recovery path still has to be seen against a double-digit contraction in the economy in 2020, which is still not expected to be fully erased before 2023, at the earliest, and the ongoing expansion in the employable workforce, which along with furloughed persons have added to the jobless rate.”

Mr Rolle added that the Central Bank was sticking with its 2 percent growth forecast for 2021 based on the tourism industry’s performance for the first nine months of 2021. “It mainly reflects the timing of when tourism restarted in 2021, rather than the current level of business being experienced,” he explained.

“In particular, it was only during the 2021 second quarter that stopover business substantially resumed, and at least the middle of the summer before cruise visitors started to return. When business resumed, occupancy levels were anecdotally more recovered than it was forecasted that they would be.

“Nevertheless, there was no substantial re-entry in the earlier months that would compare even partially to the healthy close-out of the 2019-2020 winter season. The upbeat seasonal performance in the current half of 2021 will not significantly make up for this difference.”

Mr Rolle said increased foreign exchange market transactions were also evident of a pick-up in private sector activity as the economy rebounded from COVID-19. “On the inflow side, commercial banks’ purchases of foreign exchange from the private sector increased by 30.5 percent in first three quarters of 2021,” he added.

“On the expenditure side, private sector demand for foreign exchange, through purchases made from commercial banks, rose by 21.5 percent over the same months. Deducting the inflows from outflows, the private sector returned to being a net supplier of foreign exchange to commercial banks, as compared making a net drawdown on such resources in 2020.

“This also substantially reduced commercial banks’ net reliance on the Central Bank for foreign exchange, and net drawdown against the external reserves. At the same time, the net inflows of foreign exchange from Government borrowing lessened.”

Turning to the external reserves that support the Bahamian dollar’s one:one peg with its US counterpart, the Central Bank governor said they stood at $2.57bn as of yesterday. He added that, even with deducting the special drawing rights (SDRs) received from the International Monetary Fund (IMF), they would stand at $2.32bn - just ahead of the $2.29bn recorded exactly one year ago.