The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

An Opposition MP yesterday warned that the introduction of Value-Added Tax (VAT) would not help the Bahamas generate the 5.5 per cent real GDP growth necessary to cut then unemployment rate 50 per cent.

K P Turnquest, the FNM MP for east Grand Bahama, told Tribune Business that VAT’s arrival would likely “slow investment” into the Bahamian economy for at “least a year”, and a time when this nation needed all the capital injections it could get.

Speaking after Tribune Business revealed that the International Monetary Fund (IMF) had projected this nation needed to achieve average 5.5 per cent real GDP growth for the next five years to slash the unemployment rate in half, Mr Turnquest cast doubt on whether the Bahamas could achieve this in the present climate.

“Despite all the rhetoric, we know we need to grow this economy, and increasing taxes is not going to help,” he told this newspaper.

“The Government needs to focus on investment promotion and domestic investment, encouraging domestic businesses to have the tools they need to compete and grow.”

Mr Turnquest described the relatively high growth rates needed by the Bahamas “to get to 50 per cent of what we need” as “a big concern”.

Acknowledging that the $2.6 billion Baha Mar project would help, the FNM MP expressed hope it would not be delayed, and added: “Hopefully the Government can get some of those other projects they say they have under their wings up and running.

“We aren’t seeing any results yet. At this point we have no evidence to support the requirement that they will meet that [growth] target, but we have to be hopeful.”

Describing the Government’s tax reform plans as “a significant factor” in the growth equation, Mr Turnquest added: “You’re talking about introducing a new tax system [VAT], and no one wants to be the guinea pig.

“It’s going to slow investment for at least a year until people understand what’s going on and how it’s being administered. It’s not going to help.”

The IMF, in a presentation to the recent High Level Forum on the Caribbean held at the Atlantis resort, said the Bahamas had to more than double its current 2 per cent GDP growth rate to cut unemployment by 50 per cent.

The IMF study suggests that while this nation’s economy is currently forecast to generate average real GDP growth of 2.5 per cent between 2013-2018, this will simply not be good enough.

The Fund is projecting that Bahamian real GDP will have to grow by an annual average of almost 4 per cent over the next five years if the economy is to successfully absorb all new entrants to the workforce – chiefly the 5,000 graduates that come out of high school every year.

And, if is to achieve both this and a 50 per cent reduction in the unemployment rate, the IMF has predicted that the economy will have to achieve real GDP growth rates of 5.5 per cent – more than double, or twice, what it is currently achieving.