The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE impact of COVID-19 on the Bahamian economy has been pegged at $9.5bn, according to a joint study by the Inter-American Development Bank (IDB) and Economic Commission for Latin America (ECLAC).

The “shocking” losses inflicted by both COVID and Hurricane Dorian reinforce the urgency for The Bahamas to become a “$15bn-$16bn” economy, warned Robert Myers, of the Organisation for Responsible Governance’s (ORG), yesterday, who said this nation rapidly needs “a 30-50 percent increase” in economic output as the twin disasters inflicted a total $13.1bn in economic losses and damage.

Mr Myers said a combination of increased economic growth and “much more fiscal prudence” is needed.

Yet he warned this effort will be “swimming headlong” into the cost of living crisis sparked by global inflation, and the growing fears of a recession in the US and other major markets, which threatens to restrict The Bahamas’ GDP growth potential due to the country’s dependence on external economic drivers.

“Wow. That’s a big number. It seems very high to me,” Mr Myers told this newspaper when informed of the IDB/ECLAC’s COVID findings. “We’re going to have to be considerably more fiscally prudent in order to get the headroom for these types of events that are clearly not going to go away. They’re more likely to increase in frequency than decrease.

“It’s not just hurricanes. You’re seeing the effects of multiple natural disasters, whether it’s famine, disease or drought. These things are a sign of much bigger environmental issues. It’s very hard to get your head around it, but there’s no doubt of it happening. The likelihood is we’ll have more of these events, and we need to get our fiscal house in order.

“We need headroom, we need resources. Wasting it [taxpayer dollars] on inefficiency and corruption is not an option. That is going to cause us to go under. The report just provides even more impetus to get our house in order, our fiscal house in order. It’s just shocking to see it in one big number like that. It just shows you how impactful that is, and how much harder we have to work and plan to deal with these things.”

The combined $13.1bn in losses inflicted by COVID and Dorian are equivalent to 117.5 percent of The Bahamas’ forecast $11.142bn real GDP for the 2022-2023 fiscal year, as outlined in the recent Budget document. Real GDP strips out the impact of inflation but, even using the constant benchmark that allows for the impact of rising prices, the Bahamian economy is barely just bigger at $13.264bn.

And, when set against the $11.843bn national debt at end-March 2022, the total COVID/Dorian impact is some 10.6 percent greater. This shows the sheer enormity of what the back-to-back natural and health calamities are estimated to have cost the Bahamian economy, and how much the country has been set back, with the IDB/ECLAC report predicting that the effects of the pandemic will linger through to almost year-end 2023 provided there are no further shocks.

Their assessment also estimated that COVID will cost Bahamian workers an estimated $2.4bn in lost wages between 2020 and 2023, with the employment impact of these losses pegged at around 30,000 workers or 14.7 percent of the workforce. Some 83 percent, or $7.9bn of the $9.5bn total COVID loss, relates to tourism and the damage caused by lockdowns, border closures, testing requirements and other restrictions that hit international travel.

Given the scale of this damage, Mr Myers told Tribune Business: “We’ve got to get GDP to $15bn to $16bn. That’s the reality of it. We need a 30 percent, 40 percent, 50 percent increase in GDP, and that’s only going to happen through development, efficiency in government, improving the ease and cost of doing business, and through generating improvements in education, particularly workforce productivity.

“We don’t need that [report] to illustrate how far we need to go to get back up. We know that. ORG has been talking about this for four to five years now. That’s nothing new. The only thing that’s new is if someone takes it seriously. The previous administration didn’t.” Based on the $11.142bn real GDP projected for 2022-2023, The Bahamas will need to increase economic output by between 34.6 percent and 43.6 percent to hit Mr Myers’ target.

And, while the economy is “rapidly improving” and unemployment “has got to be going down” compared to COVID-19’s darkest days, the ORG chief added that hitting his GDP goals will likely soon run into obstacles. “Unfortunately we’re swimming headlong into global inflation,” he added, “and the likelihood of a global recession. That growth is going to be capped at some point because prices are out of control. Gasoline in The Bahamas is close to $7 per gallon.”

Mr Myers backed the Prime Minister’s drive to ram home to the world’s major polluters the great harm that climate change is causing to The Bahamas, as well as themselves, while agreeing that post-hurricane rebuilding costs have accounted for a significant portion of the country’s national debt -possibly as much as 40 percent.

He added, though, that The Bahamas must practice what it preaches on climate change as “men living in glass houses shouldn’t throw rocks”. Explaining what he meant, Mr Myers said: “We should be more fiscally prudent, stop importing Bunker C oil and have a higher degree of solar and renewable energy penetration, and have less gas vehicles. We’re equally culpable.”

Describing The Bahamas as “one of the most disaster prone countries in the world”, the IDB/ECLAC study spelled out the consequences of this continued vulnerability. “National losses due to COVID-19 for the period 2020-2023 were estimated at $9.5bn,” the report said.

“Note that although there was no infrastructure destruction, this is 2.7 times the cost of damages and losses due to Hurricane Dorian. The two disasters, caused by external shocks (Hurricane Dorian and the COVID-19 pandemic), are estimated to have cost the country $13.1bn. This puts the Bahamas in an even more vulnerable situation as the 2022 hurricane season begins.

“In September 2019, Hurricane Dorian devastated the island of Abaco and part of Grand Bahama. It was the most costly disaster in the country’s recent history. Recovery and reconstruction works began before the pandemic, but reconstruction efforts have been impacted by different economic and resource challenges that have been exacerbated due to COVID-19,” it added.

“The pandemic also highlighted the country’s socio-economic vulnerability as businesses and citizens felt the crunch. These impacts highlighted the need for comprehensive Disaster Risk Management (DRM) and Health Risk Management (HRM), among other strategies and instruments, to serve the country better.”