The Tribune

By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

A full tourism recovery that matches 2019's record-setting numbers may not occur until early 2023, the Central Bank's governor warned yesterday, with the economy possibly shrinking further in 2021.

John Rolle, addressing a webinar organised by the Chartered Financial Analyst (CFA) Society of The Bahamas, said: “The baseline forecasts are very clear. You're going to have a very sharp reduction in economic activities, and it will take at least 24 months for a full recovery to get here once it started.

"It was very clear as well that there would be very large fiscal deficit financing needs because revenues were off and the Government is in a situation where it needs to provide stimulus, particularly in this case, very targeted social assistance support.”

Mr Rolle said that besides monitoring the Government’s stimulus and social assistance support, the Central Bank also began “to position ourselves whenever there is the onset of the recovery, the necessary path of our private sector that needs additional support in terms of access to credit.

"We're giving banks more tolerance in terms of the debt service capacity and other assessments that they might use to determine who is creditworthy," he added. "When we start to look ahead now to recovery for us in The Bahamas, it is really about restarting and sustaining activity in the tourism sector.”

Arguing that The Bahamas must open up the tourism industry despite the ever-present infection risk posed by the COVID-19 pandemic, Mr Rolle said: “We expect that we will still want to enjoy some returns from tourism in the midst of the winding down of the pandemic, meaning that we cannot wait until the entire population is exposed as vaccinated.

"We need to find a way to carefully manage some returning of tourism in the interim in our present state.” Going further, Mr Rolle suggested that a full tourism rebound may not happen until 2023.

He said: “When we talk about the economic forecast and the period ahead, it really amounts to saying that we're not going to get back to the 2019 levels until about 2022-2023. So that's the path of recovery that is ahead of us in tourism.”

Forecasting low growth prospects for 2021, and possibly even an economic contraction, Mr Rolle said low growth means The Bahamas will not have recovered the ground it lost due to the COVID-19 pandemic. He added that the recovery process could take the country until the “end of 2022 or beginning of 2023".

Mr Rolle added that critical to recovery will be how The Bahamas “accelerates” its processing of both domestic and foreign direct investment proposals. He highlighted the latter as a means by which The Bahamas can attract extra “foreign exchange supply".

Mr Rolle said, though, that tourism will dominate the economic rebound regardless of what happens with investments or other economic sectors. He added: "There are a lot of risks ahead of us in the outlook. Some of these may be less stringent now than they may have been, and that is partly because we know that the vaccines have some reasonably high rate of success.

"That helps in terms of timing of recovery. But the fiscal side will still require careful management. And when you start to talk about fiscal, you're talking about a lot of the issues related to credit market relationships and debt management that one has to keep in mind.”

Mr Rolle warned, however, that The Bahamas' potential for economic growth is “very low, particularly compared to where we would like to be". He added: "Some estimates say that, on average, the potential growth for The Bahamas is not more than 2 percent given that the “tax base and economic base is very narrow".

This narrow base, Mr Rolle said, had worsened the “blow” from COVID-19 and Dorian's “dramatic” impacts on employment and financial sector balance sheets, making recovery more difficult.