The Tribune

• Tells House 5-6% annual expansion ‘within our grasp’

• Governance reformer: Nothing in budget to achieve it

• Ambition not as impressive set against COVID fall-out

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE prime minister’s ambitions of achieving a “consistent” five to six percent annual GDP growth rate are “nothing to write home about” when set against COVID-19’s economic devastation, it was argued yesterday.

Governance reformers and economists told Tribune Business that while the target unveiled by Dr Hubert Minnis was appropriate for a robust economy, it was far less impressive when measured against how much the Bahamian economy had shrunk due to the fall-out from the pandemic and Hurricane Dorian.

The Department of Statistics recently revealed that the Bahamian economy had contracted by 14.5 percent or $1.641bn in real terms in 2020, and by 24.7 percent or $3.256bn in nominal terms that includes inflation’s impact, prompting one observer to argue that this nation needs to expand its output by sevem to eight percent annually for “at least the next five years” to escape its escalating economic and fiscal crisis.

However, Dr Hubert Minnis yesterday told the House of Assembly the measures unveiled during the 2021-2022 budget communication will ensure that five to six percent annual GDP expansion is within reach as he sought to focus public attention on the government’s bid to grow The Bahamas out of its debt and deficit predicament.

“We believe that with targeted structural reforms, consistent growth in the range of five to six percent is well within our grasp,” the prime minister argued in leading-off yesterday’s budget debate in the House of Assembly, placing his faith in freeing up the private sector via a combination of ease of doing business reforms, targeted tax incentives and financial assistance to small and medium-sized enterprises.

However, Robert Myers, the Organisation for Responsible Governance’s (ORG) principal, told Tribune Business that the Budget lacked the measures necessary to foster the growth levels that the Prime Minister wants and The Bahamas needs.

“There’s nothing in there that tells me they have a plan that is going to provide that kind of growth,” he said. “I don’t see anything in there. I think they’ve got to be, if you really want to be dealing with the issues, at 7-8 percent for at least the next five years.”

To achieve such economic expansion, Mr Myers reiterated that The Bahamas must also convert tax consumers within the public sector - largely the bloated civil service workforce and loss-making state-owned enterprises (SOEs) - to revenue earners.

“We have to convert those burners to earners in that period,” he added. “It’s growth and conversion. The only way to get that 7-8 percent growth is to convert the burners to earners because we need that [public sector] workforce on the other side to get to that 7-8 percent.

“We’re going to have to shift that workforce, good, bad or indifferent. Those individuals have some capacity to produce, and we need everyone engaged. We need that 40 percent who are under-utilised in the public sector in the private sector to lift the economy.

“It has to start with growing the economy. That’s the problem. Talk is cheap. You have to have vision, and policies and mobilise people to do that. Politics has got to go out the window, tribalism has got to go away. We all have to move in the same direction.”

The “burners” referred to by Mr Myers include the likes of Bahamasair, the Water & Sewerage Corporation, Airport Authority and Broadcasting Corporation of The Bahamas, all of which consumer multi-million dollar taxpayer subsidies. The largest such consumer, of what is a $420m collective annual subsidy, is the Public Hospitals Authority (PHA).

Besides the SOEs, he also argued that The Bahamas needs to progressively reduce a civil service that a recent Inter-American Development Bank (IDB) report said was 40 percent over-staffed by transferring excess workers to the growing private sector.

Calling on the Government to “think outside the box” and seek new advice, Mr Myers added: “If we don’t tap those people then you’ve got a ten-cylinder economy running on three cylinders. We need all the power in the world to get the economy to move at 7-8 percent.”

Meanwhile, Rupert Pinder, a Bahamian economist who lectures at the University of The Bahamas (UoB), told Tribune Business that it was important to set the Prime Minister’s growth ambitions against the context of COVID-19’s devastating impact as well as determine whether he was talking in real or nominal terms.

“If he’s talking 5-6 percent of where we were in 2020-2021, then it means we’re still way behind 2019-2020,” he explained. “If you knock off 14.5 percent or 24.5 percent as a result of the pandemic, then in that case a 5 percent growth rate means we’re still significantly behind the numbers prior to the pandemic.

“If you told me that we will have growth rates of 5-6 percent in real terms, then we start to get somewhere, but if that’s a nominal 5-6 percent that does not take you back to pre-pandemic levels. A 5-6 percent growth rate is good in good times, but given where we’re coming from, 5-6 percent is not great. 

“The reality is it’s nothing to write home about given where we are coming from, and it doesn’t begin to address the unemployment numbers we have as a result of COVID-19.” Acknowledging that the economy faced structural issues pre-COVID, Mr Pinder added that a 5-6 percent growth rate would also be insufficient to address the increased spending and borrowing commitments taken on by the Government.

The Bahamas faces a long haul to recover from COVID-19, with the Central Bank and the International Monetary Fund (IMF) both indicating that pre-pandemic numbers may not be attained until 2023 at earliest. The Fund forecast that The Bahamas will only enjoy an anemic two percent rebound this year.

While GDP growth rates of 8.5 percent and four percent are projected for 2022 and 2023, respectively, The Bahamas will merely be recovering the tourism activity it lost to COVID-19. While 3.5 percent growth is forecast by the IMF for 2024, it also foresees that this will quickly peter out to 1.8 percent and 1.5 percent in 2025 and 2026.

The Prime Minister yesterday acknowledged the Bahamian economy’s deep-rooted structural challenges, saying: “Hurricane Dorian and the COVID-19 pandemic exacerbated deeply-rooted economic and fiscal structural issues that pre-date this administration.

“Historically, economic growth for The Bahamas had been between three to four percent. Growth has often been at levels too low to reap sustained and meaningful results across the many sectors of our economy. The years after the 2008 financial crisis, and the great recession that followed, were especially difficult. For the decade that followed, growth in most years was flat or negative.”

He was backed by an Inter-American Development Bank (ID) report, which confirmed: “The country has experienced stagnating growth with widening fiscal deficits over the past few decades. Economic growth has been low and slowing over the past two decades, from an average 1 percent yearly growth rate between 2000 and 2009, to an average 0.8 percent growth rate between 2010 and 2019.”