The Tribune

By FAY SIMMONS

TRIBUNE Business Reporter

jsimmons@tribunemedia.net

THE CENTRAL Bank expects the Bahamian economy to grow by more than 3 per cent in 2026, its Governor said yesterday, while warning that rising energy costs and global uncertainties continue to pose threats.

John Rolle, speaking at the regulator’s 2026 third quarter economic briefing, signalled the Central Bank’s confidence that the Bahamian economy will both outperform the International Monetary Fund’s (IMF) 2.6 percent gross domestic product (GDP) growth forecast for 2026 and its projected long-run average of around 1.5 percent.

He added that the Bahamian economy expanded at a healthy pace during the first nine months of the year, supported by accelerating tourism activity and sustained foreign direct investment (FDI), particularly in residential real estate, hotels and cruise-related developments.

“The Central Bank still expects the economy to grow at a rate that exceeds 3 percent in 2026,” he said, noting that the pace of expansion remained above the country's estimated medium-term potential growth rate of between 1.5 and 2 per cent annually.

Mr Rolle said the stronger performance reflected increased investment and hotel capacity expansion, alongside continued improvements in tourism.

Stopover earnings grew at a faster rate than in 2025, supported by higher visitor volumes, hotel occupancy levels and room rates. The vacation rental market also recorded expanded sales and higher pricing, while cruise activity continued to grow alongside investment in private cruise destinations.

Demand from the US, the country's largest visitor market, also recovered, supplementing continued growth in arrivals from non-US markets, particularly Canada.

“In line with the healthy growth in tourism and foreign investment receipts, measured foreign exchange inflows further strengthened in 2026. Through the first nine months of the year, commercial banks’ total purchases of foreign currency from the private sector grew at an accelerated pace of 13.9 percent to $6.6bn,” Mr Rolle said.

“However, amid stronger credit expansion and other import demand stimulus, sales of foreign currency to the private sector rose at a faster rate, by 15.4 percent to $6.4bn. As a result, commercial banks’ net purchase of foreign exchange from customers was moderately tapered in comparison to 2025, and commercial banks therefore made a smaller net sale of foreign exchange to the Central Bank.”

Mr Rolle cautioned that the economy remains exposed to external developments that could slow growth, particularly the prolonged conflicts in the Middle East and Eastern Europe, elevated global oil prices and uncertainty surrounding international trade policies.

He said the Bahamian economy was bearing the cost of these developments through higher imported prices, including fuel and energy costs. “The economy bears the burden of those costs no matter what,” said Mr Rolle.

He also pointed to international monetary policy conditions, which were maintaining “a higher than otherwise anticipated cost of debt financing”, adding to the challenges facing foreign investment projects and limiting the interest savings the Government might otherwise have achieved on its foreign currency debt.

Mr Rolle said these downside risks did not necessarily mean the economy will move from growth into contraction, but could prevent it from expanding as quickly as it otherwise would have.

“Somewhere in the numbers that you see, it means that you're growing slower than you would have been experiencing in the absence of those headwinds,” he said.

Higher financing costs could make certain foreign investment projects financially unviable, Mr Rolle explained, while weaker consumer confidence and household finances could discourage some visitors from travelling to The Bahamas.

Despite those pressures, the Governor said the country remained in a comfortable position from a foreign reserves standpoint, with no imminent risk to the Bahamian dollar's fixed exchange rate.

The Central Bank estimated that external reserves stood at $2.8bn at the end of October 2026, slightly below the $2.9bn recorded at the same point in 2025, when government external borrowing proceeds had helped boost the balance.

Mr Rolle said reserves remained “more than adequate to support the Bahamian dollar fixed exchange rate”, with the Central Bank expecting them to close the year at a stable to mildly lower position than in 2025.

Private sector credit growth strengthened to approximately 6.1 per cent on an adjusted basis during the first nine months of the year, compared with 4.3 per cent over the same period in 2025.

The banking sector also recorded an improvement in loan performance, with non-performing loans declining to 4.5 per cent in September from 5 per cent a year earlier.

Looking beyond the current growth forecast, Mr Rolle said The Bahamas’ longer-term growth potential could improve if structural challenges, particularly the cost of doing business and energy costs, were addressed.

“If we have cheaper energy, we could increase that medium term and push it outside of that 1.5 to 2 percent [GDP growth] range,” he said.