The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas must not lose sight of urgent structural reforms as it focuses on immediate needs, a governance reformer warned yesterday, adding: "Let's get out of the private sector's way."

Matt Aubry, the Organisation for Responsible Governance's (ORG) executive director, told Tribune Business that it remained critical to address The Bahamas' underlying faults that date from pre-COVID-19 while it continues to grapple with the pandemic's fall-out.

Describing the International Monetary Fund's (IMF) recent growth and fiscal forecast as "reasonable", he added: "The reality is we need to correct some of these structural pieces that are in place to make it easier to invest further, and drive investment by locals and foreigners.

"Are we doing what we need to do to get there? What is going to drive us out of this is fostering and shoring up private sector opportunities in industries and areas, and levels of taxation, that we may never have thought of before.

"Let's get out of the way of the private sector so that whatever system we have there not be these obstacles. Let's apply concepts everyone seems to agree on, such as the ease of doing business, digitisation, procurement system monitoring and managing the Government's finances and how money is disbursed," he continued.

"These are going to be critical things to allow the private sector to develop out, whether it's businesses we have or businesses to come. We have to have a much clearer road from ideas to inception to enterprise. It can't be as long and challenging, and has got to happen quickly."

The IMF predicted last week that The Bahamas faces “anything but a V-shaped recovery” from COVID-19 with a four-year haul to regain economic output lost in 2020 lying ahead.

The Washington DC based fund, in a statement on its annual Article IV consultation with The Bahamas, also further slashed its projections for the Bahamian economy’s performance this year and in 2021 as it branded this nation “one of the hardest hit countries in the Caribbean” due to more than 7,500 COVID-19 infections.

Its latest forecast increased the severity of The Bahamas’ real gross domestic product (GDP) shrinkage to -16.2 percent for 2020, as opposed to its last -14.8 percent contraction estimate, while further slashing 2021’s economic growth forecast to a relatively tepid two percent.

The latter revision represents a further cut, after the IMF previously revised its projections for next year’s Bahamian GDP growth from 6.7 percent to 4.6 percent as recently as October. With The Bahamas’ short-term rebound prospects more than halved, and a further $269m slashed from 2021’s forecast economic output, this nation faces a longer and harder recovery than initially thought.

The IMF forecast that Bahamian GDP will only recover to pre-COVID-19 levels come 2024, meaning that this nation likely faces a four-year climb at least to dig itself out of the hole created by the worldwide pandemic. That is more conservative than the one given by Central Bank governor, John Rolle, who earlier this week estimated 2023 for a full tourism and economic rebound.

“Real GDP is projected to decline by 16.2 percent in 2020, followed by a modest rebound of two percent in 2021, and to converge back to its pre-pandemic level only by 2024,” the IMF said of The Bahamas.

“The current account balance is projected at a deficit of 17.4 percent of GDP in 2020, and will improve only gradually, consistent with the projected pick up in tourism in 2022. Foreign reserves reached a record level of $2.3bn in October and should remain well above the minimum suggested threshold of three months of imports over the medium-term.

“Risks around the baseline are high, reflecting the uncertain evolution of the COVID-19 pandemic and vulnerability to weather-related natural disasters.”

Using 2018 real GDP data, as the 2019 figures are not yet available, the IMF’s forecast would see Bahamian economic output shrink from $10.763bn to around $9.02bn - a drop of $1.743bn, which represents what has been lost due to COVID-19.

Applying the IMF’s revised two percent GDP growth estimate for 2021 to the $9.02bn figure results in Bahamian GDP rebounding by some $198m to $9.2bn, a figure that is still some $1.563bn below 2018’s economic output, and which gives an insight into the severity of the losses and devastation inflicted by COVID-19.