• ORG chief admits ‘big deal’ to expand GDP by 1/3
• But only way to support Gov’t size with no austerity
• World Bank reaffirms 4.1% growth; falls to 3% in ‘24
By NEIL HARTNELL
Tribune Business Editor
The Bahamas must grow its economy to $16bn, expanding its size by around one-third, if its future is “to make sense” in the absence of government austerity, a governance reformer urged yesterday.
Robert Myers, the Organisation for Responsible Governance’s (ORG) principal, admitted that increasing economic output by some $4bn was “a big deal” but asserted it is the only way to support “the size of government” after successive administrations showed no will to cut back on taxation and public spending.
Speaking after the World Bank yesterday forecast that the Bahamian economy will grow by 4.1 percent in 2023, he told Tribune Business he was “not interested in percentages” and that the country’s focus should be placed on the size of real annual gross domestic product (GDP) as the key performance measure.
With Bahamian GDP growth projected to slow to 3 percent in 2024, Mr Myers said the country remains “a long way off” from the 6-7 percent rate he has constantly argued is necessary to both slash existing unemployment by 50 percent and to absorb the 5,000 high school graduates who enter the workforce every year.
To even come close to his target economic output, the ORG principal added that the Government must prioritise “streamlining” the approvals process for domestic and foreign investment and unclog the “logjam” that frequently results in months or years passing between a Heads of Agreement signing and when a project actually has “shovels in the ground”.
While agreeing that the World Bank’s growth targets were very achievable for The Bahamas, despite the threats posed by high inflation and the threat of a US recession, Mr Myers said this nation was presently enjoying strong expansion only because it was recovering the near-24 percent economic shrinkage lost to COVID-19 in 2020.
“The key is that we’ve got to get GDP up to $15-$16bn a year,” he told this newspaper. “A percentage is not really what we should be looking at. We should be looking at what our GDP is, and it should be $15-$16bn, not $12bn. Then with the tax structure and size of government, it starts to make sense or more sense.
“We still need to achieve faster growth with it, but if GDP climbs to $15bn-$16bn and is ahead of public spending growth we can get on the right track. That number needs to get to $16bn in real dollars. We need $16bn in GDP. I don’t care about percentages; I care about real dollars. I care about shovels in the ground, not percentages.
“We should be focused on $16bn, $17bn, $18bn, and that will take a lot of effort on the part of the private and public sectors, together with the education of workers so that they do the right thing. We’ve got to work at it. We’re not doing that. We’re still very lethargic,” Mr Myers added.
“In real growth, getting from $12bn to $16bn is a big deal, but we have to grow the economy because nobody seems willing to do austerity measures. The FNM didn’t do it, and the PLP isn’t doing it for the most part. If they’re not doing that, we’d better get the economy to $15bn to $16bn. That’s 30 percent growth. That’s what we need to do. What the World Bank is saying is that we’re a long way off that.
“There has been no effort by any government, current or previous, to put any austerity targets in place. The alternative to no austerity is growing the economy at an even higher rate and, if we get that to happen, there will be no need for austerity.”
Based on Central Bank data for the national debt, which was pegged at $11.167bn at end-September 2022 and equivalent to 89 percent of economic output, Bahamian GDP would be around $12.5bn. If that is accurate, economic output would still need to expand by some 28 percent or just under $3.5bn to hit the upper range of Mr Myers’ target.
The ORG principal’s argument is that an enlarged economy would be better placed to support, and finance, the present size of government in the absence of fiscal austerity such as spending cuts, new and/or increased taxes or a combination of these measures.
However, the Davis administration will argue that its forecasts, which show a $564m fiscal deficit for 2022-2023 becomes a $278.8m surplus by 2024-2025, prove it is targeting the consolidation that Mr Myers and others are seeking. And the deficit for the 2022-2023 first quarter, or initial three months of the year, stood at just over $20m.
Meanwhile, Mr Myers said the Government and its agencies need to become more efficient and speed up the processing of approvals for Bahamian and foreign investment projects if his GDP target is to ever be achieved. “If we do not have austerity measures in place, it’s got to be growth, growth, growth, and that means project approvals which all these agencies need to be on it,” he told Tribune Business.
“There’s not reason why you shouldn’t be able to get an answer back in two weeks’ from the Ministry of Works, Department of Physical Planning, the Department of Environmental Planning and Protection (DEPP), Water & Sewerage and BPL. Any of them. They need to put effort into that, and then it becomes a matter of is the developer properly financed, rather than waiting around for 18-24 months to get approvals after the Heads of Agreement.
“That’s the problem. It takes too long. There’s a log jam there. The more growth we want, the more log jam were going to have. We’ve got to get all these sound projects that are on the board active. We’re good at talking about them but can’t get them approved. The process is very arduous. It’s very laborious and can easily be streamlined. After they’ve done their Heads of Agreement it goes into the abyss, the public sector abyss, and that needs to change.”
Mr Myers said the Adelaide Pines project in south-western New Providence, in which he is one of the partners, was still waiting for final approvals around one year into its development. “It takes a tremendous amount of time and effort,” he explained. “We’re pretty close, but it’s a long process getting all the details figured out.
“There needs to be more effort to get these projects moving. They’re signing Heads of Agreements with these developers. It’s one thing to approve them, but it doesn’t affect GDP until they get going. There’s got to be shovels digging. The faster they can approve things and get people employed, and taxes generated, the better for the Government. The Government should be most motivated to get this going, but the bureaucracy is very challenging.”
The ORG chief said speeding-up the approvals process was becoming ever-more critical as rising US and global interest rates increase financing costs, which could influence developers to put their plans on hold. When asked what specific steps could be taken to “streamline” these efforts, Mr Myers declined to provide details but said he could “put a paper out” on that issue.
Calling for a system that allowed policymakers to monitor the progress made by investors in obtaining the necessary approvals, so the necessary intervention can occur to eliminate red tape and get developers to move, Mr Myers said: “That’s the kind of fury and intent we need to get GDP up. If we don’t, it’s just going to be business as usual.... Everybody talks about it but nobody’s doing it, including myself. It’s very hard to move the needle.”