The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian economic output for the 2023 first-half was last night said to have beaten pre-COVID comparisons by $295m in a signal that this nation is now moving beyond post-pandemic reflation.

The official “advance estimates” for this year’s second quarter and first-half gross domestic product (GDP), unveiled by the Bahamas National Statistical Institute (BNSI), disclosed that economic output for the six months to end-June 2023 was 4.5 percent and 4.4 percent, respectively, ahead of 2019 and 2018 comparisons.

Real GDP, a measurement which strips out inflation’s impact, stood at an estimated $6.827bn for the 2023 first-half as opposed to $6.532bn and $6.539bn for the same period in 2019 and 2018, respectively.

The Institute, in a brief analysis, said 2023 first-half GDP expansion was some 8.6 percent higher than last year’s $6.288bn output. First and second quarter growth were 13.7 percent and 3.8 percent ahead of 2022’s performance.

“The first quarter of 2023 showed a 13.7 percent increase, while the second quarter of 2023 revealed a 3.8 percent increase in real growth when compared to the same period of the previous year,” the Institute added. “The quarterly GDP trends for 2023 show the Bahamian economy also outperformed pre-pandemic levels.

“These combined gains for the first half of 2023 reveal a growth in the Bahamian economy which surpasses that of the same period in 2019. Domestic business activity in each quarter of 2023 reported more than $3bn in Real GDP, with the first quarter reporting the highest level of $3.44bn and the second quarter $3.39bn.

“The year-ending second quarter 2023 showed an increase of 11.5 percent nominal growth and 8.6 percent real growth when compared to the same period in 2022. These preliminary estimates reveal an overall nominal growth of $741m and real growth of $539m over the previous half year.”

The Institute’s analysis signalled that the post-COVID tourism rebound, plus construction and real estate activity linked to foreign direct investment (FDI) and second home buyers/vacation rentals, continues to drive GDP expansion.

It said “accommodations and food services”, which is heavily dependent on tourism, led the way with a $162.1m or 32 per cent year-over-year increase for the 2023 first half when measured against prior year benchmarks. Construction showed the greatest increase with a 42 percent, or $89.7m year-over-year jump, while real estate for owner-occupied and rentals was up 4 percent at $43.2m.

Financial services and insurance produced a 10 percent, or $53.8m, year-over-year increase in the value of its economic output, while the utilities industries - water, electricity and sewerage - generated a $41.4m or 25 per cent jump against 2022 benchmarks.

The release of the Institute’s figures is timely for the Government given that it is extremely eager to place the economic focus on The Bahamas’ GDP growth projections following the International Monetary Fund’s (IMF) Article Iv statement that effectively blew a hole in its fiscal forecasts by predicting the 2023-2024 deficit will come in almost three times’ higher than Budget estimates.

The data also dovetails with the IMF’s upward revision of The Bahamas’ growth forecast for 2024, which has been raised by 0.5 percentage points to 2.3 percent of GDP. Michael Halkitis, minister of economic affairs, said in a statement: “Previously they were estimating 1.8 percent. Now they are estimating that the economy will grow in 2024 by 2.3 percent.

“That’s an increase of 0.5 percentage points To go from 1.8 percent to 2.3 percent they are raising their projected growth rate by 28 percent. That’s a massive revision.” In percentage terms, yes. But, based on the GDP estimates set out in the 2023-2024 Budget, that 0.5 percentage point increase is equivalent to about $70m-$75m in additional economic output.

While the latter figures should not be discounted, by comparison the IMF is predicting a fiscal deficit of around $379m, which would represent a near-$248m overshoot of the Government’s $131.1m forecast. And the IMF is also forecasting that GDP growth will decline to 1.8 percent in 2025, bringing it down in line with The Bahamas’ historical 1-2 percent annual trend.

The IMF, in its Article IV statement on The Bahamas, said: “The Bahamas’ economy continued to rebound vigorously in 2022. Real GDP growth reached 14.4 percent and unemployment fell to 8.8 percent with a broad-based expansion that was especially strong for tourism.

“However, labour force participation, particularly among men, remained below pre-pandemic levels. In 2023, international flight and cruise arrivals rose well above their pre-pandemic levels leading to a projected 4.3 percent expansion in the year, bringing the economy back to estimates of potential output.

“After peaking at 7.1 percent in July 2022, inflation has fallen steadily to 2.3 percent in July 2023, largely driven by the fall in global energy prices.” However, the IMF added that all the economic risks facing The Bahamas are tilted towards the negative.

“Risks to the outlook are skewed to the downside. A fall in tourism demand, due to an economic slowdown in source markets, could weigh negatively on the growth outlook. Furthermore, renewed pressures on global food and oil prices could impose a burden on lower income households and put pressure on the balance of payments,” the IMF added.

“Any associated fiscal measures to dampen the pass-through of global prices to the domestic economy would have to be well-targeted to mitigate further strain the fiscal position. Finally, The Bahamas is highly exposed to risks emanating from climate change and natural disasters. In the event that risks are realised, domestic financing challenges could increase.”