The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Democratic National Alliance’s (DNA) leader says the Bahamian economy is “hanging on by a thread”, after official statistics effectively confirmed it has been in recession for two years.

Branville McCartney told Tribune Business that the Bahamas “seems to be going in reverse”, and in the opposite direction to the rest of the world economy, after constant price GDP contracted by 1.66 per cent in 2015.

That figure, revealed by the Government’s Department of Statistics on Friday, followed a 0.52 per cent decrease in constant price gross domestic product (GDP) in 2014 - suggesting the economy has been in recession for two consecutive years.

Measuring GDP in constant prices strips out inflation’s impact when calculating the Bahamian economy’s worth (the total value of all goods and services that it produces).

The Department of Statistics itself said the ‘constant price’ GDP measurement was “more useful for studying trends in economic growth” than its current price counterpart, which includes inflation’s impact and showed the Bahamas expanded by 2.74 per cent in 2015.

Department of Statistics officials declined to confirm whether the economy was in recession at Friday’s press conference, even though their data provides strong evidence that it is once inflation’s impact is eliminated.

The statistics quietly paint a grim picture of an economy struggling in vain to grow, with both private sector investment and consumer spending declining in 2015.

Gross capital formation, which measures investment in buildings, equipment and infrastructure, shrank by almost 12 per cent year-over-year in 2015.

And household/consumer spending, which accounts for about 70 per cent of GDP, contracted by 6.5 per cent in constant prices.

The Department of Statistics findings suggest that Bahamian businesses lack the confidence and financial wherewithal to invest in expansion and job creation, while Value-Added Tax’s (VAT) imposition has further strained disposable income levels that were already hurting from a near-15 per cent unemployment rate.

Faced with these figures, Mr McCartney told Tribune Business: “I think we are holding on by a thread, and I hope this Government can start to do things to get people back to work, and ensure we diversify and build industries so our economy can truly grow.

“These are indications we are not growing in the way an economy ought to grow in 2016. The rest of the world is going forward, and we seem to be going in reverse.”

The DNA leader added that “hard-working Bahamians are paying” new and increased taxes to sustain the Government, but the latter was failing to uphold its ‘side of the bargain’ by creating a climate for greater economic growth.

“Investment is down because we have people reluctant to invest in this country, including Bahamians, due to the crime situation and this Government,” Mr McCartney told Tribune Business.

“Consumer spending is down, plain and simple, because they don’t have the money. In the businesses I’m involved with, for the most part they’re down.

“Business started to contract immediately when VAT was introduced. Business went down by 10 per cent, and it’s probably a little more now. Money in this country is not working for the average and middle class Bahamian.”

Mr McCartney said Bahamians were now directing their spending to essentials, such as food, shelter and clothing. “At the end of the day, we’re seeing no jobs, and investment is little to none,” he added. “There’s nothing on the horizon.”

Just as concerning for policymakers will be the Department of Statistics’ finding that arguably the Bahamas’ three most important industries - hotels (tourism), financial services and construction - all contracted in 2015, contributing the negative ‘constant price’ GDP.

While real estate, business service and retail/wholesale expansion offset this to some extent, Mr McCartney pointed out that tourism and financial services were supposed to be the Bahamas’ two main economic pillars.

“We have been declining in the tourism industry, our number one industry, for years,” he told Tribune Business.

“We were the blue-eyed boy in the region for tourism, but countries like the Dominican Republic, Cuba and Jamaica have surpassed us for the last couple of years.

“Sun, sand and sea are not going to do it any more.”

Turning to the Bahamas’ tourism deficiencies, the DNA leader added: “We are a very high-priced destination, we are crime ridden, our service is not up to par, we’re dirty as a country and the dump is still burning. Persons will realise this place is not what it’s promoted to be.”

As for financial services, Mr McCartney said: “We need to look at how to bring financial services back, so not only is it the ‘number two’ industry; we’re going to have to find ways to make it the ‘number one’ industry.”

He acknowledged that the sector had been enduring a ‘slow motion contraction’ since 2000, with the Bahamas failing to replace the jobs and institutions lost through the regulatory regime changes in the wake of the 2000 ‘blacklisting’.

“Things have not gotten better since,” the DNA leader told Tribune Business. “We need to be deliberate in our approach, be steadfast and strong, and become the ‘number one’ financial services destination in this region.”

In contrast to the private sector’s contraction, the Government’s contribution to Bahamian GDP expanded by 9.2 per cent in ‘constant’ terms in 2015.

The Government’s final consumption spending, which includes payments to public sector workers, increased by 3.5 per cent on an ‘individual’ basis. That includes spending on items such as healthcare and education.

‘Collective’ consumption, which measures all other government services, expanded by 9.2 per cent.