The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Public sector pay negotiations are a potential "fly in the ointment" that may cause the Government to miss its 1 percent deficit target for 2019-2020, the deputy prime minister warned yesterday.

K P Turnquest told Tribune Business that the "active union negotiating season" represented an unknown "that can throw you out" in terms of fiscal projections depending on the salary arrangements agreed with public sector worker representatives.

And, with global economic risks rising due to this week's stock market sell-off and the continuing US-China trade war, Mr Turnquest said the Bahamian economy "could be a victim" of such forces.

He pledged to update the Bahamian people should this nation's fiscal and economic outlook change, but voiced optimism that the country was "still on track" to achieve the 1.8 percent economic expansion for 2019 projected by the International Monetary Fund (IMF) in its latest forecast.

Speaking after Moody's, the international credit rating agency, reiterated its belief that the Government will miss its 1 percent of gross domestic product (GDP) deficit forecast for the 2019-2020 fiscal year, Mr Turnquest acknowledged that there were several factors that could throw this prediction off-course.

"The other fly in the ointment in terms of meeting the 1 percent projection for the fiscal year is its an active union negotiating season," he told Tribune Business. "That's one of the things that can throw you out.

"The other thing, as we look out to the horizon, is what's happening globally with the US-China back and forth, which we could become a victim of. We have to bear these things in mind."

Pressure for wage and benefits increases has been mounting throughout the public sector in recent months. Kimsley Ferguson, the Bahamas Public Services Union's (BPSU) president, last week said it had received no response for 10 weeks to its proposal for salary increases, lump sum payments and salary reviews for members across the public sector.

Brensil Rolle, the Cabinet minister responsible for the public service, hit back earlier this week by arguing that the Government was negotiating in good faith with the BPSU. However, he conceded that the counter-proposal to the union's salary demands was still being developed as the Ministry of Finance had yet to go through the numbers and cost to the Public Treasury.

“I think what has not been concluded yet is the salary package that everyone has been talking about," Mr Rolle said, "and I said to the president that I could not confirm the salary side of the discussion until the minister of finance [Mr Turnquest] has done his homework and that is an understanding I think we’ve had for the last couple of weeks.”

Besides the civil service itself, unions and their members have also been pushing for salary and benefits increases at government-owned corporations and entities such as the National Insurance Board and the Public Hospitals Authority (PHA).

Mr Ferguson and the BPSU, which represents the latter's workers, have made no secret of their demands for two lump sum payments and a salary increase. As the PHA is financed by a $219m annual subsidy from the Bahamian taxpayer, any salary and benefits increase will have to come directly from the Public Treasury.

Mr Turnquest, meanwhile, said Moody's prediction that the Government will miss its 2019-2020 deficit target was "fair" given The Bahamas poor track record when it comes to achieving its fiscal goals.

The rating agency is projecting that the 2019-2020 deficit will come in some $82.2m higher than the Government's own estimate of $137m, reaching $219m.The latter produces a ratio equivalent to 1.6 percent of GDP as opposed to the Government's 1 percent, which is the goal it has to meet as per the Fiscal Responsibility Act.

"It's a fair judgment," Mr Turnquest conceded. "One of the things we've consistently been saying is our track record of meeting our commitments and projections is pretty poor. It's a fair assessment.

"One of the things that we're trying to do is build a positive track record so that we build credibility with all these agencies. That redounds not only to our ratings but the perception of investors - both bondholders as well as potential foreign direct investors.

"We've got to change that perception. That's a fact. We can't change the past, but going forward remaining faithful to our consolidation plan will build the track record the perception and scrutiny we continually find ourselves under."

Moody's, though, maintained the same 1.8 percent GDP growth expectation for The Bahamas in 2019 as that of the IMF. And, even if the US economy slowed as predicted, it said The Bahamas would be able to partially offset any fall-out and maintain annual economic growth of between 1-2 percent due to the tourism-related investments in the pipeline.

"Right now, based on the outlook, we know we're still on track for economic growth and, barring any unforeseen or extraordinary circumstances, I believe we'll get there. If everything kicks in as it's supposed to kick in I think we will be very pleased with the outcome and the growth."

This is also traditionally the time that the Ministry of Finance keeps a close eye on the weather as the Atlantic hurricane season looms, with its potential for throwing out even the best-laid fiscal plans.

Mr Turnquest confirmed that the Government was also closely watching the implications of this week's global stock market sell-off, and added of international developments: "It is a real and present threat but we know we have to be focused on the factors we are in control of and ensure we are doing the best we can to secure our growth.

"We are putting in place as many conservative positions as we can so if the unexpected happens we are able to have a stimulus or ride out whatever the circumstances may be. That's a key part of the fiscal plan we put in place last year; to put in place resources and headroom we need to respond without subjecting ourselves to harsh and unexpected borrowing."

The deputy prime minister added that the Government's finances had been "tracking according to plan" during the first six weeks of the 2019-2020 fiscal year, and said: "We're looking good, although with the September period coming along things can slow down."