The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas' trade deficit expanded by $314.6m or 10.7 percent during 2022 to hit a five-year high of $3.254bn, it was reveled yesterday, as inflation and higher global oil prices caused import costs to soar.

The Bahamas National Statistical Institute, unveiling the annual 2022 foreign trade statistics review, said: "The balance of trade (total exports minus total imports) continued to result in a deficit. The trade deficit increased by 10.7 percent between 2021 and 2022, resulting in a negative balance of $3.3bn."

While Bahamian exports increased year-over-year by $42.6m or 7.8 percent, growing to $586m from $543.4m in 2021, these figures were not surprisingly dwarfed by imports given that The Bahamas brings in virtually everything it consumes. As a result, imports leapt by $357.1m or 10.3 percent to a new five-year high of $3.84bn as opposed to $3.483bn the year before.

The $3.84bn represents foreign exchange that The Bahamas has to generate through a surplus on its capital account, representing monies earned by services exporters such as tourism and financial services, to fund those imports. Between 2018 and 2022, the trade deficit peaked at just shy of $3bn in 2018, with imports reaching a pre-2023 high of $3.524bn that year.

"Data on merchandise trade for the year 2022 show that the value of commodities imported into The Bahamas totaled $3.8bn, resulting in an increase of 10.3 percent between 2021-2022," the 2022 trade report said.

"The category of 'food and live animals, which totalled $690.4m accounted for 18 percent of the imports in 2022. This category had an increase of 7.7 percent from 2021 which totalled $690.4m. This was followed by 'mineral fuels, lubricants and related materials’ totalling some $686.2m (17.9 percent of all imports) for 2022.

"Other major categories that contributed to imports were the categories of ‘machinery and transport equipment’, which totalled $684.6m representing 17.8 percent of total imports; ‘miscellaneous manufactured articles’, which accounted for 13.6 percent with a total of $520.4m; and ‘manufactured goods’, which totalled $517.3m, also representing 13.5 percent of all imports for 2022."

As for fuel, the report added: "The specific commodities which contributed mainly to total imports were, ‘diesel’ valued at $313.4m; ‘motor gasoline (unleaded)’ valued at $124.2m; ‘other fuel oils’, valued at $78.8m; and ‘jet fuel’ at $72m. The combined value of these commodities represented 15.3 percent of total imports.

"In 2022, total exports (domestic and re-exports) totaled $585.9m, showing an increase of 7.8 percent from 2021. The major contributor to this was the category of ‘mineral fuels, lubricants and related materials’ ($161.1m) in 2022, which showed an increase of 12.7 percent from 2021’s total of $184.6m.

"Domestic exports ($180m) accounted for 30.7 percent of total exports. The major groups contributing to domestic exports were the categories of ‘food and live animals’ totalling $106.9m (59.4 percent of total domestic exports), and ‘crude minerals’ totalling $33.1m for 18.4 percent of total domestic exports. The commodities that contributed mainly to domestic exports were ‘spiny lobsters’ valued at $79.2m and ‘blocks and shape moulding and beads expansible polystyrene)’ at $27.5."

Turning to The Bahamas' major trading partners, the 2022 report said: "While the US ($3.3bn) maintained its position as The Bahamas’ main trading partner representing 84.9 percent of total imports, there was a fair amount of trade as it relates to imports between The Bahamas and China ($72m) and Spain ($34.2m). Both, however, combined only represented less than 2.8 percent of total Imports.

"In terms of exports the US ($393.2m), France ($27.7m), United Kingdom ($10.2m) and Sweden ($2.2m) were among the top partner countries, representing 67.1 percent, 4.7 percent, 1.8 percent and 0.4 percent of total exports, respectively."

The Bahamas' draft National Trade Policy revealed that tourism’s “collapse” at COVID-19’s peak “exposed the fragility” of The Bahamas’ current economic model by producing rare twin goods and services trade deficits worth a combined $1.7bn. It disclosed that the pandemic-induced economic lockdown and border closures virtually wiped out tourism earnings that had produced a $311m total trade surplus just one year before.

This nation’s economic model has traditionally relied on services exports, chiefly tourism and financial services, to generate foreign currency surpluses to cover the multi-billion dollar annual trade deficits incurred on physical goods. While this system worked reasonably well prior to COVID, the resulting $3.2bn plunge in 2020 services exports created huge shortfalls on both the goods and services sides that combined for an overall deficit “higher than in any recent years”.

Asserting that trade will play a pivotal role in repositioning the Bahamian economy for the post-pandemic “new normal”, the National Trade Policy report said: “In the pre-COVID period, The Bahamas’ large services trade surplus was roughly sufficient, and increasingly so, to counterbalance the goods trade deficit.

“The strong performance of services, in particular the tourism sector, helped The Bahamas to achieve a combined goods and services trade surplus for the first time in 2019, at $311m. However, the COVID-19 pandemic caused a collapse in services exports in 2020 to $1.3bn from $4.5bn a year earlier, less than the services imports of $1.4bn in that year.

“The impact of the pandemic was thus a dual goods and services trade deficit with a combined value of $1.7bn, higher than any deficit in recent years and exposing the fragility of the country’s current trade model, which is based on a very narrow export base.”

As an import-dependent country, relying on the outside world for most of what it consumes, the National Trade Policy report said COVID-19 had revealed the vulnerability of a Bahamian economic model that has grown to increasingly rely on tourism - “one of the globally most affected sectors by the pandemic” - to finance these purchases via its annual foreign currency earnings.

“Trade has an important role to play in the new normal,” the report added. “But for this to happen, The Bahamas needs a coherent National Trade Policy which aligns with the broader development strategy, and to avoid a piecemeal approach of uncoordinated and sometimes conflicting measures affecting the country’s exports and imports of goods and services.

“Such a trade policy has so far been lacking in the country, which may at least in part explain the long-term declining trend that trade has played for The Bahamas. Up to the mid-1990s, trade in goods and services was equivalent to more than 100 percent of GDP, compared to the less than 80 percent in recent years.”