The Tribune

By Neil Hartnell

Tribune Business Editor

nhartnell@tribunemedia.net

The deputy prime minister has signalled that the government remains on track to hit its main 2018-2019 fiscal target by touting a $400m reduction in the annual deficit since it took office.

Addressing the UHY accounting firm’s Americas confidence on Friday, K Peter Turnquest, pictured, disclosed figures ahead of this week’s 2019-2020 budget that hint the Minnis administration will bring the fiscal deficit in within range of its $237m target for the current fiscal year.

“In just two years the government reduced the deficit by over $400m, which is significant for a small country,” Mr Turnquest said. “It was not easy to do, and it required making some difficult decisions, but our commitment to restore the country’s fiscal health and maintain the standard of living was resolute. With the growth numbers out, we are now seeing the fruits of that.”

Given that the fiscal deficit for the final year of the Christie administration, 2016-2017, was said to have been $661m, the reduction cited by Mr Turnquest indicates the “red ink” - or amount by which the Government’s spending exceeds its income - will come in around the 1.8 percent of GDP target set out in the Fiscal Responsibility Act.

Giving an upbeat assessment of The Bahamas’ economic prospects, Mr Turnquest focused on the 1.6 percent real GDP growth achieved in 2018 as a sign that the Government’s economic and fiscal policies are starting to bear fruit.

“Over the past two years the Government has worked incredibly hard to set The Bahamas on a sustainable path. Just five years ago, the country experienced negative growth at -3 percent. For several years, it struggled to arrest the decline,” he added.

The deputy prime minister described last year’s 1.6 percent real GDP expansion as “a significant turnaround” compared to the “mild” 0.4 percent growth average achieved over the prior three years, although the performance under-shot both the International Monetary Fund’s (IMF) 2.3 percent forecast and the Government’s own 2.2 percent.

Still, Mr Turnquest said: “It is worth noting that private sector performance was the main driver behind the upward momentum.... Household consumption also increased during this period by $140m, and exports of goods and services increased by $244m.

“In the tourism industry, a combination of healthy gains in visitor arrivals, increased room availability and expanded airlift have caused a major rebound as well. In 2018, tourism numbers were up by 16.9 percent, and that trend is projected to continue throughout 2019.”

Mr Turnquest added that The Bahamas will have “fully transitioned” to the new chart of accounts for government financial reporting when the new fiscal year starts on July 1, 2019, bringing it into line with international standards and best practices. The new Public Financial Management Bill is due to be ready for year-end.

Pointing to the end to so-called “ring fencing” in the financial services sector, the deputy prime minister said: “For the past 50 years we have approached regulation from the standpoint of whether an individual or entity was resident or non-resident.

“This legal framework of privileges and benefits to non-residents was inherited many decades ago. It served its purpose at the time as a way to encourage the inflow of foreign exchange. However, today, it doesn’t work. We are adopting a new approach that brings fairness to the system. We are adopting a new way that positively shifts the overall value proposition of The Bahamas’ financial sector.”

Mr Turnquest continued: “As we move into an increasingly digital economy, where the rules of tax jurisdiction becomes more and more complex, and states become more and more aggressive in cross-border taxation, countries like The Bahamas have to adapt.

“The skill level of our labour force has to be a part of our value proposition. Ease of doing business has to be a part of our competitive edge. The structural reforms needed to make these plans a reality are underway. In any country, structural reforms take time. With some of our initiatives, we still have a long way to go, but we are making measurable and meaningful progress.”