The Tribune

• Fund’s 1.5% growth forecast for 2026 ‘cannot work’

• Bahamas must ‘get in boat together, and row hard’

• And Gov’t ‘must not drown in public sector red tape’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas “must prove the IMF wrong” by soundly beating economic growth forecasts that “cannot work” in sustaining this nation’s spiralling debt, a governance reformer warned yesterday.

Robert Myers, the Organisation for Responsible Governance’s (ORG) principal, told Tribune Business that The Bahamas has simply “got to do better” than the 1.5 percent gross domestic product (GDP) expansion the International Monetary Fund (IMF) is predicting for 2026.

The Fund, in its latest World Economic Outlook, held firm to its 2 percent and 8 percent GDP expansions in 2021 and 2022, respectively. Mr Myers, though, said that while the latter figure may look impressive, it really only represents The Bahamas recovering some - though not all - of the tourism output lost to the COVID-19 pandemic and associated restrictions.

Arguing that defying the IMF’s expectations, and surpassing them to consistently achieve 5 percent annual growth rates, will be “the challenge for every Bahamian” as well as the Government, the ORG chief said all stakeholders have little choice but to “get in the boat together and row hard” to pull the country out of its post-COVID and Dorian doldrums.

“If you were down 15 percent, and you’re coming up 8 percent, it’s no big shocker. It’s no big story,” Mr Myers said over the economy’s 2020 shrinkage, and anticipated 2022 rebound. “You’re not back to normal, back to zero or back to the baseline of pre-COVID 2019.”

When this newspaper pointed out the IMF’s 1.5 percent growth forecast for 2026, he replied: “That cannot be. The Government and the Bahamian people have to push hard to get GDP growth up. If we don’t get at least 5 percent GDP growth, that’s the rising tide that floats all boats.

“We’ve got to do better than that. It doesn’t work. Let’s prove the IMF wrong because that cannot work. We cannot sustain the Government’s debt, the deficit and job creation and everything else at 1.5 percent growth. That doesn’t cut it.

“We’ve got to consistently be better than that. That will be the Government’s and every Bahamian’s challenge. We cannot raise taxes; we have to get GDP up. We have to get in the boat together, row hard and if we have to change laws and policies to create greater efficient and effectiveness, we’ve got to do whatever we need to do. It’s sink or swim, and we need to swim.”

The former Minnis administration’s Fiscal Strategy Report projected that the $1.348bn and $951.5m deficits, incurred in 2020-2021 and projected for this fiscal year, respectively, will start to taper off and lessen from 2022-2023 onwards as tourism rebounds and the economy reflates along with government revenues.

It remains to be seen whether the newly-elected Davis administration agrees with this glide path, timelines and projections regarding the Government’s fiscal affairs, with the former government also forecasting that the $10.356bn national debt’s growth rate will also lessen - albeit it is still forecast to continue rising past the $11bn mark.

Mr Myers, meanwhile, renewed his call for The Bahamas to “get the economy moving”. He added: “It’s only us screwing it up. There’s plenty of opportunities. We’ve got to start with the ease of doing business and the cost of doing business, making it less expensive and removing the bureaucracy and making things happen.

“That has to be the challenge, has to be the focus. Keeping the politicians focused on that is critical. We can’t let them drown in the public sector bureaucracy. We’ve got to keep them focused.”

Matt Aubry, ORG’s executive director, backed Mr Myers in agreeing that The Bahamas needs to consistently generate annual 5 percent GDP growth if it is to haul the economy out of a post-COVID slump.

While the IMF did not provide any growth forecasts for the intervening years, he agreed that the outlook for 2026 is “somewhat pessimistic” and the economy’s wheels “all need to be hitting the ground and going in a straight direction” to avoid this scenario.

“I think that sound generally realistic for this year,” Mr Aubry said of the IMF’s 2 percent forecast for 2021, “but somewhat pessimistic for the future going to 2026. What we know is that for a number of years our economy has been relatively stagnant, and then we had the impact of the twin crisis of Dorian and COVID-19.

“It knocked us down significantly. The kind of growth we need to stimulate, and how we get there, is more in the area of 5 percent per annum.” He pointed out that the Government’s debt management strategy, due to be released later this month, is critical to managing the nation’s liabilities while it seeks to stimulate the economy.

The ORG executive director added that it has “never been more important to facilitate” Bahamian businesses and make this process “as streamlined as possible”, ensuring they gain access to capital, licences/registrations and approvals in the quickest possible time.

While the former Minnis administration had appeared to recognise this, and the newly-elected government’s rhetoric suggesting much the same, Mr Aubry argued that The Bahamas “needs to see tangible policies as soon as possible”.

Making sure government procurement opportunities are available to Bahamian entrepreneurs “in an open space” was also identified by the ORG executive director, while infrastructure private-public partnerships (PPPs) needed to be similarly “competitive”.

Mr Aubry suggested turning to The Bahamas’ diplomatic corps and diaspora to find suitable foreign joint venture partners for local firms on these PPPs. “We have to make sure we don’t sacrifice local opportunities while becoming a competitive space for foreign direct investment,” he added.

“With that level of growth the IMF has been talking about, we can look forward to some challenging times. I think we need to take it as an indicator that all wheels need to be hitting the ground and going in a straight direction with all sectors working collectively. The time for politics is really over.”

Mr Aubry also said there was “little to be done to avoid” the IMF’s 5 percent inflation projection for 2021, adding that this was largely an imported phenomenon due to global supply chain bottlenecks. 

He argued that the best defence was for Bahamians to spend more money in the local economy, with domestic merchants and producers, and said: “We have to protect ourselves to get through this period as painlessly as possible.

“There’s a certain level of inflation that’s inevitable, but if we drive economic opportunities from the local environment we will be in a better position to manage through that. It’s also a significant reminder that we need to be making sure the Government is spending monies as efficiently and effectively as possible.”