The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas must focus on “how we grow from here” because returning to pre-COVID’s $13bn economic output is “not sufficient to take the ship of state forward”, a governance reformer argued yesterday.

Hubert Edwards, head of the Organisation for Responsible Governance’s (ORG) economic development committee, told Tribune Business that The Bahamas’ “comeback” from the depths of the COVID pandemic in less than three years should not be diminished or ignored.

But, speaking after the Bahamas National Statistical Institute (BNSI) unveiled data showing 2022’s real gross domestic product (GDP) was slightly higher than that for the last COVID-free year of 2019, he argued there was already consensus that this level of economic output is still some $3bn short of what is required to meet the country’s economic and fiscal objectives.

With the Government seeking to increase its revenue-to-GDP ratio to 25 percent by the 2025-2026 fiscal year, and the recently-published Fiscal Strategy Report setting targets for a near-$16bn nominal GDP and $4bn in annual government revenues by 2027, Mr Edwards told this newspaper that achieving these goals should now be the priority for policymakers.

Arguing that the “comeback” to pre-COVID GDP merely “sets the foundations”, he questioned how The Bahamas will expand its economy beyond “the status quo” without having enacted significant reforms to the infrastructure, policies and enabling environment that foster higher growth and employment.

The Institute, in unveiling its “advance” GDP estimates for 2022, said economic activity last year expanded by 11.9 percent on a nominal basis and some 14.4 percent in real terms “as business activity returned to pre-COVID 19 levels”. The real GDP measurement, which strips out the impact of inflation, increased by $1.614bn year-over-year to $12.854bn driven largely by the strength of the continued tourism recovery.

The latter was also almost $300m higher than 2019’s $12.56m real GDP number, with these figures measuring the total value of goods and services produced within an economy during a given period. “Most industries showed modest gains when compared to 2021. In 2022, the total value of goods and services produced in the Bahamian economy was estimated at $12.9bn in nominal prices, and at $12.85bn in real prices,” the Institute said.

“Based on a review of the numbers, the economy is seemingly just right back about where we were in 2019,” Mr Edwards said in response. “The growth rate looks very strong coming out of 2020, 2021.... What’s important, as we look at the economy, is we’re right back at almost that $13bn mark for GDP, and that’s a good point to be at this time. The recovery, for the most part, is almost complete.

“In the first instance, it’s very important this has been achieved, and secondly it signals at least a level of robustness even though the economy is not highly diversified or as diversified as we want it to be. It shows the underlying strength of tourism, financial services and other industries that drive the economy. Most of this is driven by tourism.

“There’s still a level of pent-up demand coming out of the COVID crisis, but we need to keep an eye on this and see how sustained it is going forward. There’s nothing to say these numbers coming out of 2023 going into 20234 can be sustained. The question for policymakers is how can this be sustained, and how do we grow from here?”

The GDP data suggests the Bahamian economy may have recovered more rapidly from COVID’s ravages than even the Central Bank has projected. John Rolle, its governor, previously forecast that The Bahamas’ recovery would be completed in 2023 rather than by the end of 2022.

But the $16bn nominal GDP for the 2026-20257 fiscal year, as targeted by the Fiscal Strategy Report, means the Bahamian economy has to expand by just over $3bn in four years if that goal is to be achieved. And government revenues will have to increase by $1.2bn over the same time period to strike the $4bn mark, while the 25 percent revenue-to-GDP goal is projected to be met in just three years.

“We should not in any way try to minimise this comeback. Work had to be put into getting us here, but we must not over state” its importance, Mr Edwards argued. He added that priority focus must now be placed on achieving sustained 3-5 percent annual GDP growth over the next four years if The Bahamas is to achieve the targets that have been set.

“It forces us to contemplate how we’re going to get there, and whether tourism has the legs to move us beyond this point,” he told Tribune Business. “We’ve recovered back to 2019 levels, but does tourism have the power and impetus to move us beyond this point? If there are projects and initiatives in the pipeline to cause that growth to happen we will be OK. If not, how are we going to achieve those targets, which are very important going forward.

“It’s always an inflexion point when you have a comeback. You’re back to the status quo. The question is how do you grow from a status quo circumstance without there being an underlying change in infrastructure, an underlying change in policy, and an underlying change through reforms.

“We are kind of back where we were with the same enabling system. The question is whether there is sufficient [tourism] demand to pull the system that existed before further than it went in the past without a push factor [from domestic reform]. How are we going to effectively make the growth projections which have been outlined over the next three to five years?”

Warning that The Bahamas cannot afford to rest on its laurels, Mr Edwards said: “Having lost such a significant portion of our economy to COVID, and before that Hurricane Dorian, work had to be put into ensuring we came back at a sustained and rapid pace. There are many, many other countries, especially in the region, where growing back to pre-COVID levels and the rate of recovery has not been as fast or as robust as The Bahamas is enjoying.

“We should not in any way, shape or form minimise that. From my perspective, it’s good to be back and we should celebrate that, but we should not spend too much time celebrating. We need to look to the future. The country has clearly indicated that 2019 growth levels are clearly not sufficient to take the ship of state forward.

“We have this 25 percent revenue-to-GDP ratio, growth to $16bn of GDP, and government revenue needs to grow to $4bn within three to four years. These are critical issues that should be gaining our assessment, analysis and thinking going forward. Coming back is just setting the foundation. How do we get from here to where we need to be?” Mr Edwards added.

“We’ve not seen sufficient change in prior infrastructure, policies and the system to say it will be easy to grow from the present position to where we need to get to.”