The Tribune

By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

The government is pinning its hopes on the Economic Recovery Committee’s (ERC) work to beat Moody’s projection that GDP will return to pre-COVID levels only after 2024.

K Peter Turnquest, deputy prime minister, said: “Last week, we acknowledged the decision by credit ratings agency Moody’s to downgrade the country’s credit rating as a result of the economic shocks caused by the COVID-19 pandemic. Similarly, Italy, India and even Canada have also seen downgrades.

“I want to reiterate that fair-minded Bahamians know our current state of fiscal affairs is a result of these external shocks, and not because of our performance as a government.

“As Moody’s highlighted, this administration has shown leadership by significantly improving the government’s fiscal credibility and effectiveness through our accountable, and responsible, fiscal policy framework and consolidation efforts.”

Asked what the government is planning to do to quicken the economic recovery pace, Mr Turnquest said it is placing its hopes on the Economic Recovery Committee, which “is tasked to think outside of the box and to consider the current circumstance”.

He added: “We anticipate that this committee will bring back recommendations that we will be able to execute in the medium to short-term to encourage some additional non-traditional activity.

“But, in the longer term, to help us to visualise and to conceptualise what the restructuring of this economy may look like if, for instance, tourism takes longer than we anticipate to rebound.”

Mr Turnquest voiced optimism that the more than 500 businesses supported with funding arranged via the Small Business Development Centre (SBDC) will “carry some of the load” during this period by generating additional economic activity and employment.

Despite larger hotel properties on New Providence electing not to reopen yesterday, the deputy prime minister said Family Island resorts had returned and he had heard “encouraging” news from Eleuthera and Exuma on the private boats and yachts market.

Mr Turnquest said: “We are seeing a move towards a more specialty product or indigenous product, which we anticipate will have an even more impactful benefit for local Bahamians.”

Marlon Johnson, acting financial secretary, said in response to the possibility that there would be another downgrade from Standard and Poor’s (S&P): “The impact of any credit downgrade weighs obviously on your borrowing cost.

“What we had known is that Moody’s had already signalled the downgrade to happen, so in our calculations with our borrowing costs we factored in the notion that the downgrade was likely and is happening around the world in similar jurisdictions.”

He added that the government will be “moderating” the impact of the Moody’s downgrade, along with the possibility of similar action by S&P, through “relying a little bit more on the multilateral entities, principally the IDB (Inter-American Development Bank) and also the CDB (Caribbean Development Bank).

“There is a facility from the World Bank, which is a guarantee facility that the World Bank provides, that we remain eligible for,” Mr Johnson said. “The good news about those facilities is that the borrowing rates are not dependent on the international market; we are member shareholders in these entities.

“So we are able to get interest rates on those loans at a fraction of what we pay on the open market, and often a grace period on principal payment. The repayments are extended over 20 years or 25 years in most cases.”

Mr Johnson added, though: “Underlying all of those rating agencies is the reality that whatever we do we have to move towards fiscal balance as quickly as possible, and that means following through on reform efforts once this shock is over and the fiscal consolidation exercise that the government was on resumes as quickly as possible.”