The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Deputy Prime Minister yesterday conceded the Government's economic and fiscal plans are "ambitious", amid forecast of subdued credit growth of "less than three per cent" through 2021.

K P Turnquest, pictured, responding to the Caribbean Development Bank's (CDB) assessment of the Government's GDP growth and consolidation targets, told Tribune Business that the goals were high out of necessity.

"It is ambitious, and we certainly hope everything goes our way in terms of what we plan and the growth to come," he said. "Anything can happen, hurricanes that derail us, but we intend to do our level best to achieve that growth plan. Barring anything unforeseen we intend to come in at Budget projections and correct the downward trend."

Mr Turnquest's assessment came as the Central Bank of The Bahamas suggested credit expansion would remain tepid for the next three years, with banks and other lenders still relatively risk averse following the hit sustained a decade ago from the 2008-2009 recession.

The regulator, responding to questions posed by potential Credit Bureau bidders, said: "Credit growth is expected to remain at less than 3 per cent per annum over the next three years.

"According to the Central Bank's Lending Conditions survey, on an annual basis new credit applications have averaged 45,800 per year since 2015. The rate of applications is expected to track the total growth in bank credit accounts."

With 247,871 loan accounts in the Bahamian commercial banking system at end-2017, and around 90 per cent of employed persons using some kind of credit facility, the Central Bank added that loan accounts had grown by a paltry 1,564 over the past five years.

While an unsustainable boom will benefit no one, the Central Bank's data suggests that the economic growth rates could still be held back by a lack of available credit, given that it is the 'juice' that fuels job-creating expansion for most businesses - especially those operating in the domestic economy.

Mr Turnquest, meanwhile, agreed that the Bahamas' growing debt burden - set to soon reach $8 billion - was "ultimately unsustainable". He added that debt financing costs (interest payments) would soon catch up with, if they had not already overtaken, the annual sums the Government spends on "society's most significant needs" - education, health and national security.

"The only way to address that is to get the debt burden under control, and the only way to do that is cut spending or increase revenues and collect the revenues that already exist," Mr Turnquest told Tribune Business.

"It is critical we get this situation under control, and we're planning to do that. I think any government would be concerned about that because at some point the weight of the financing costs collapses in on itself, and we don't want to get there."

Mr Turnquest, though, said time was "not necessarily" running out for the Bahamas to address its fiscal woes as the Government was still able to meet all its financial commitments and sovereign debt was "trading fairly well".

"We don't have any urgencies, but the sooner we get the issue under control the better for us," he told Tribune Business.

The CDB, in its recently-released economic assessment of The Bahamas, warned that this nation faced an "unsustainable" debt burden as a result of borrowing levels that exceed economic growth rates.

"The debt level in The Bahamas is currently unsustainable," the CDB said. "The Government has continued to increase its debt at a rate that exceeds the growth of the economy, causing debt payments to absorb an increasingly higher proportion of GDP.

"The Government of The Bahamas' fiscal plan to stem this tide is very ambitious. While a higher-than-anticipated growth outcome may help the Government to meet its fiscal projections for the medium term, a slightly slower pace of fiscal consolidation is projected in this outlook.

"In 2018, the primary and overall balances are projected to improve to -0.6 per cent and -3.7 per cent [deficits] respectively. This will not be enough to reduce the central government's debt-to-GDP ratio, which is projected to increase to 73.7 per cent of GDP in 2018."