The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas is “on very shaky ground” due to its failure to correct long-standing structural deficiencies in its economy, a leading private sector executive yesterday branding Moody’s decision not to downgrade this nation as “a silver lining”.

Gowon Bowe, the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman, told Tribune Business that the credit rating agency’s analysis had given some “credibility” to the Government’s fiscal reform efforts.

Yet, while Moody’s had opted for a “glass half full” assessment of the Bahamian economy, Mr Bowe warned that every passing day without resolution at Baha Mar brought this nation closer to reduced future growth expectations.

And while the rating agency had praised the Government for exceeding its initial Value-Added Tax (VAT) and fiscal consolidation targets, the Chamber chief said it had joined S&P in noting the economy’s structural weaknesses.

“It gave a little bit of credibility to the growth and performance we’ve had up to this point, but it is very shaky ground,” Mr Bowe told Tribune Business.

“Despite VAT and other developments, we’ve not turned around the structural deficiencies that would lead to lead to sustained growth and sustained prosperity.”

Detailing these structural weaknesses, Moody’s said: “Other important issues facing the Bahamas involve the labour market, household leverage (debt), and ease-of-doing business.

“With unemployment remaining relatively high, mainly due to structural considerations, and considering the debt overhang of households, private consumption and residential investment will likely remain depressed.

“The liberalisation of the labour market as well as measures aimed at fostering employment of youth, who suffer from higher unemployment rates, could provide some relief. The Government is also in talks with banks in order to seek ways to reduce non-performing loans and kick-start private credit again.”

Referring to the Bahamas’ consistent slump in the World Bank’s ‘Ease of Doing Business’ rankings, Moody’s added: “The Bahamas ranks 97th out 189 economies. While it has improved in terms of paying taxes (it went from 47th in 2014 to 31st), it still lags on starting a business (95th); dealing with construction permits (92nd); registering property (179th); getting credit (131st); and enforcing contracts (125th).”

Mr Bowe yesterday said the reports by both Moody’s and Standard & Poor’s (S&P) had highlighted the need for the Bahamas to develop a long-term economic development strategy to ensure it “stayed the course”.

“What we now see is a need for that National Development Plan,” Mr Bowe said, referring to the Government-initiated project that is currently consulting with Bahamians throughout the country.

“It will give us a long-term strategy paper. With it, there will be bumps in the road but we can stay the course. Currently, we don’t know if we have been thrown off course if we hit one of these bumps, as we are not sure what direction we’re driving in.

“The rating agencies have highlighted the need for a long-term strategic plan, and hopefully that plan is the National Development Plan.”

Mr Bowe described as “a silver lining, if you will” Moody’s decision not to follow S&P’s lead and downgrade this nation’s sovereign credit rating itself.

While this was “very important” in breaking the cycle of downgrades, the Chamber chief added that Moody’s was still warning of reduced medium term growth with Baha Mar “on the backburner”.

“We need to somehow get the flame burning beneath it, so it’s not sitting in the back,” Mr Bowe told Tribune Business.

He added that both credit rating agencies would be “working back” timelines to assess the growth rates this nation would need to achieve, and when, to avoid further action on its sovereign creditworthiness.

“Every day that passes without agreement and the commencement of construction pushes us closer to that trigger line,” the Chamber chairman said of Baha Mar.

With the international credit rating agencies applying close scrutiny to the Bahamas, Mr Bowe warned politicians and policymakers that they would be held accountable for their words and deeds, as “our every move has a ripple effect”.