The Tribune

• Governor: Demand to beat inflation, recession threat

• Cruise arrivals ‘eclipse pre-pandemic’ performance

• August stopover arrivals 90% of pre-COVID levels

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Pent-up tourism demand for The Bahamas will continue to “overpower” global inflation and the threat of a US recession “through to the end of 2023 at a minimum”, the Central Bank’s governor asserted yesterday.

John Rolle, signalling a positive near-term outlook for the Bahamian economy at the regulator’s latest quarterly economic briefing, said travel desire in the country’s major visitor source markets will continue to drive a post-COVID recovery that could have been “even stronger” if not for negative global headwinds.

Pointing to a cruise tourism performance that “has already eclipsed pre-pandemic levels”, and August stopover air arrivals that had returned to 90 percent of pre-COVID levels, he said: “Understand that the tourism dependent economies got started at a different time point in terms of the strength and trajectory of their recoveries.

“That is something that is still happening for countries like The Bahamas and others because the travel sector is still growing back in capacity to service the demand, and satisfy the needs, of consumer. Even with the changes happening in global economic activity, and the impact higher interest rates will have, we are experiencing and benefiting from the pent-up demand for travel that was not met at the height of the pandemic.

“That result, for us, is going to overpower some of the negative trends out there in the global environment,” Mr Rolle continued. “What we should also take from the outlook and projections for The Bahamas is that had the global environment presented itself in an even more favourable context, the growth seen from The Bahamas would be even stronger.

“We should take from that that our performance would be even stronger to the extent it would have drawn on other positive elements of the global economy.” The world is facing increasing economic threats at present due to persistent high inflation, which has forced developed country central banks in the US, UK and Europe to raise interests in a bid to cool rising prices, thereby sparking fears of a global downturn that could involve a recession in the US or elsewhere.

High energy prices and their associated volatility, together with geopolitical uncertainties caused by Russia’s invasion of Ukraine, are acting as further drags on global economic growth. The Bahamas, as a services exporter and open economy, is especially vulnerable to external shocks of any type but Mr Rolle yesterday voiced optimism that tourism’s rebound will more than counter these outside forces in the near-term at least.

Asked by Tribune Business how long The Bahamas’ pent-up tourism demand will outweigh negative external pressures, Mr Rolle replied: “From everything that is being forecast and assessed, we see that trend continuing through the course of 2023 at a minimum.”

With airlines rebuilding airlift capacity to also benefit The Bahamas, the Central Bank governor added that this nation has yet to restore much of its resort capacity post-COVID with Nassau’s British Colonial and Melia Nassau Beach resorts still to re-open.

As a result, there exists significant opportunity to further increase higher-spending stopover visitor arrivals once the room inventory represented by these properties comes back online. “We’re looking at least through to the end of 2023,” Mr Rolle reiterated of pent-up tourism demand’s ability to counter inflation and global recession.

Maintaining his upbeat tourism outlook, the Central Bank governor said: “The Central Bank expects that the sector will complete its recovery over the course of 2023. In the case of the cruise market, the monthly seasonal performance has already eclipsed pre-pandemic levels. In the stopover segment, however, the monthly gap is still closing. The monthly comparisons show that air arrivals in August had regained approximately 90 percent of the pre-pandemic baseline.

“While in the month-over-month comparisons, the 2019 outcomes could be matched by the end of the third quarter of 2022, the Central Bank’s baseline measure for complete recovery is still a comparison of the closing months of the year against the final four months of 2018. This was a record performance period that pre-dated both the pandemic and Hurricane Dorian.”

And, while the Bahamian economy is recovering “at a healthy pace” from COVID-19, Mr Rolle nevertheless acknowledged: “The economy is facing increased inflation, through higher costs on imported goods and services. While the growth outlook is positive, the risks to the economy are expected to stay elevated over the near-term, largely as a result of the uncertainties in the international environment.”

During his last quarterly economic briefing in August, he trimmed The Bahamas’ full-year gross domestic product (GDP) growth for 2022 to between 5-6 percent due to these risks. However, subsequently the International Monetary Fund (IMF) in its October 2022 world economic outlook again revised this nation’s forecast 2022 growth back up to the 8 percent it had originally projected back in March.

Asked by Tribune Business whether the Central Bank was likely to also revise its GDP projections upwards in line with the IMF’s, Mr Rolle replied: “It’s a good question, a good question. Our estimates do not always agree to the point, but but I would say that both the IMF and the Central Bank’s expectations are within the same range, which is the growth is higher and above trend because there’s still the pent-up demand for tourism that’s driving growth.

“The IMF estimates, what we would have seen, are also responding to the trends seen in the domestic sector in terms of the strong uptick in the tourism recovery. Even though there may be variations between what we forecast and what they forecast, we’re all within the same margin of error.”