The Tribune

By NEIL HARTNELL

Tribune Business Editor

BAHAMIANS must not think the economy is "over the hump" despite projections it will grow by 2.8 per cent in 2012, a senior private sector official yesterday saying current anemic activity was likely to persist for "another 12-18 months".

Winston Rolle, the Bahamas Chamber of Commerce and Employers Confederation's (BCCEC) chief executive, told Tribune Business that he was "a bit surprised" to see the United Nations' (UN) Economic Commission for Latin America and the Caribbean (ECLAC) forecasting that Bahamian GDP would grow by 2.8 per cent this year.

This was because he had earlier this year questioned "how achievable" the 2.6 per cent GDP growth projected by the Government, Central Bank of the Bahamas and International Monetary Fund (IMF) would be, especially given the continued volatility rocking the Eurozone, in particular, and the US.

The ECLAC report, released last week, upped the Bahamas' GDP growth even further to 2.8 per cent, the fourth highest growth rate in the Caribbean region, behind only Guyana, Suriname and Belize. It based this on tourism's "continued recovery", plus foreign direct investment (FDI) in hotel construction (Baha Mar) and the Government's infrastructure programme.

However, while acknowledging the need for optimism, and that there were positive signs relating to economic recovery, Mr Rolle said: "It was late last year, or earlier this year, that the projected growth rate from the Central Bank was 2.6 per cent.

"In that time, in my capacity as the then-BCCEC chairman, I had expressed concern as to how achievable that is, so I was a bit surprised when I saw the projection of 2.8 per cent."

He added: "Like everyone else I'm optimistic and hope it's achievable, and I know from [BCCEC] chairman Chester Cooper's comments that he's positive about the economy. Let's hope that's [the 2.8 per cent growth projection] consistent with everything else that's being said."

The ECLAC report contained several other pointers as to the Bahamian economy's current condition, implying that foreign exchange earnings from tourism and FDI capital inflows are still insufficient to cover this nation's import spending.

"A more solid balance of payments current account is also necessary to provide the foreign exchange required to purchase imported inputs," the ECLAC document said of the Bahamas.

"However, this is unlikely to be achieved over the medium term, as the current account deficit widened from 10.4 per cent of GDP in 2010 to 13.4 per cent in 2011, following a rebound in imports associated with construction projects funded by FDI."

This was continued through the 2012 first quarter, the report stating: "The external current account deficit widened year-on-year to March, owing to a larger trade deficit attributable to higher imports of building materials and other goods, which offset the improvement in tourism receipts."

Mr Rolle told Tribune Business that expanding trade and balance of payments deficits had "always been one of my concerns", adding that the periods when the Bahamas enjoyed strong GDP growth were directly tied to increased FDI capital inflows.

"There's still a lot of work that needs to be done, and while things are going in the right direction, we don't want people to think we're over the hump," the BCCEC chief executive told Tribune Business. He added that the unemployment figures, and their current level, were "a huge barometer" as to how the Bahamian economy was performing.

"From a tourism perspective, the tourism numbers are not where they need to be," Mr Rolle said, warning that the Eurozone's sovereign debt crisis -even though more than 80 per cent of the Bahamas' visitor market was from the US - could "create an environment" that discouraged persons from travelling as the ripple effects spread throughout the world.

The ECLAC report said tourism activity was showing signs of strengthening, with stopover arrivals to the Bahamas up 2.9 per cent for the first two months of 2012, albit aided by promotions such as the 'Companion Fly Free' programme. Cruise passenger arrivals for the 2012 first quarter rose 9.2 per cent year-over-year to 497,684.

Bahamian business confidence was still described as "weak", though, with credit advanced to the private sector still declining. In 2011, while credit extended to the private sector during the first quarter rose 2.9 per cent year-over-year; it actually contracted by 0.2 per cent during the second quarter, remainined perfectly flat in the third, and expanded by an anemic 0.4 per cent in the final three-month period.

"It's not only weak business confidence, but persons out in the marketplace seeking credit who are already highly leveraged and, at this time, not able to qualify for the level of credit they desire," Mr Rolle said.

"I agree that we have to keep an upbeat outlook, and there are some signs of things happening that may be on the positive side, but it all shows we have to be focused on what we're doing and work our way through these very tough times we're in.

"We're in a very global environment, and have to keep our eyes keen and look at what's going on around the world, so we can be prepared and take advantage of opportunities that come up. But I still think we may have another 12-18 months of this."