By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

A former Cabinet minister says The Bahamas must prioritise economic growth over cost of living reductions.

Zhivargo Laing, pictured, former minister of state for finance under the last Ingraham administration, told Tribune Business: “Let’s be clear. It is very difficult for costs to go down in economics. It’s very difficult, that is highly unlikely to happen, and there is very little you can do, especially in free enterprise, private sector-driven economies.

“These are not centrally-controlled economies, so while the government can reduce customs duties for things for consumers that doesn’t mean the private sector has to pass on the savings.”

CEOWORLD magazine this year ranked The Bahamas as the sixth-most expensive nation in the world. It scored a combined 82.51 points in its “cost of living” rankings, rating especially highly on restaurant costs at 83.66 - a result that may have been aided by the inclusion of the automatic 15 percent gratuity. It also achieved a 62.65 score in the groceries cost index.

Mr Laing, though, argued: “It is very difficult, once you have a forward momentum in costs like that to say ‘drive it down’. In fact, the kinds of things that drive prices down as a general rule are not the kinds of things you generally want because now you are talking deflation, and deflation is often coupled with a poorly-performing economy.”

Arguing that the “squeeze” many Bahamians are feeling has more to do with a lack of income growth, Mr Laing said: “Now there is something that could be done along those lines.That’s why you have to have a very focused effort on growing the economy, and driving investments and driving innovation, and generating the kinds of things that moves people’s income upward.

“So our aim has to be economic growth. Cost reductions could only take place at the margins at best.”