The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Trade Commission's chair yesterday said it was "particularly concerning" that this nation's imports have increased "ten-fold" compared to export growth with the country's National Trade Policy set for imminent release.

Philip Galanis, also the HLB Galanis managing partner, told Tribune Business that the annual 2022 foreign trade statistics review revealed that - while Bahamian exports had grown by just under $50m during the four years to end-2022 - imports had expanded by over $500m during that same period.

Arguing that goods exports are "not expanding as fast as they should be", he noted that while their value had increased from $537.27m in 2019 to $585.904m in 2022 this paled in comparison to The Bahamas' import bill. Over the same period, this had grown from $3.321bn to $3.84bn, resulting in last year's five-year high trade deficit of $3.254bn that is imposing increasing pressure on tourism, especially, to generate the foreign currency earnings to cover the shortfall.

"Last year we seemed to return to pre-COVID levels for our national trade," Mr Galanis told this newspaper. "Last year, we generated $50m more in exports. We are not exporting as fast as we should be growing, and that's significantly impacting the trade deficit.

"What's also interesting is that the imports went from $3.3bn to $3.8bm, which is a ten-fold greater increase compared to exports. It's a bit concerning. We are importing at a very high level, much higher than exports, and that's of particular concern to us at the Trade Commission." With import growth outstripping that for exports, the result is a widening trade deficit that places increasing pressure on The Bahamas to generate the foreign currency earnings to finance it.

The Bahamas has traditionally funded its multi-billion dollar trade deficits, which capture just physical goods, with its capital account surplus generated by foreign currency earnings from its services exports - chiefly tourism and financial services. Widening trade deficits mean greater pressure on these income sources to finance the country's import bill given that it sources virtually all it consumes from overseas.

"That's precisely what the result is," Mr Galanis told Tribune Business. "We are sending $3.8bn out of the country to cover our import bill, and that puts a lot of pressure on tourism and financial services to generate the reserves to defray that cost.

"We have to pay our bills somehow. It has to come from the domestic economy or borrowing, and we don't want it to come from borrowing. We hope to fine tune and manage the economy in such a way as to reduce the impact it's having on trade and the foreign reserves.

"There's a direct correlation: One-one. We have to find US dollars to pay for imports. We really want to get off this treadmill of continuously seeing incremental increases in our trade deficit. We want to see that number come down. It came down in 2020, but that's a direct effect of COVID. We want to see exports increase concurrently or at a greater rate than imports. That's the only way we'll reduce the trade deficit."

Confirming that the Davis administration's Cabinet has approved the National Trade Policy, which will be released later this month or in early June, Mr Galanis said there were four key elements or cornerstones to the strategy. "The National Trade Policy will be launched officially in the next few weeks. There are four essential components," he added.

The Trade Commission chair identified these as "managing" The Bahamas' level of imports; more rapid export growth "which we certainly have not been doing over the past five years"; diversification of exports beyond traditional areas, such as spiny lobster and Polymers International, to get more economic sectors contributing and grow exports that way; and strengthening the Bahamian economy's competitiveness.

"The National Trade Policy has been approved by the Cabinet and I think it will be officially launched by the minister [Michael Halkitis] and the Trade Commission in the next three weeks," Mr Galanis reiterated. "I think it's well thought-out. A lot of thought went into it, and a lot of time and energy and resources went into developing it. I think it's coherent and creates a lot more opportunities for us to focus on trade than in the past."

While global inflation and higher oil prices will have been at least partially responsible for The Bahamas' expanded 2022 trade deficit, Mr Galanis said this nation needed to first focus on import substitution possibilities to narrow the 'red ink' and increase exports. He identified agriculture and fisheries (mariculture) as two sectors where this could be achieved.

Noting that The Bahamas imported $9m worth of goods from Jamaica in 2022, and $14m from Trinidad & Tobago, he suggested that this nation start by exploring whether such products can be made locally. "What's the amount of goods we can substitute by producing in The Bahamas?" he queried.

"Every dollar we are able to save by producing domestically is a dollar less that we have to send out the country to cover our bills and expand the trade deficit." The Bahamas' trade deficit expanded by $314.6m or 10.7 percent during 2022 to hit a five-year high of $3.254bn, as inflation and higher global oil prices caused import costs to soar.

The Bahamas National Statistical Institute, unveiling the annual 2022 foreign trade statistics review, said: "The balance of trade (total exports minus total imports) continued to result in a deficit. The trade deficit increased by 10.7 percent between 2021 and 2022, resulting in a negative balance of $3.3bn."

While Bahamian exports increased year-over-year by $42.6m or 7.8 percent, growing to $586m from $543.4m in 2021, these figures were not surprisingly dwarfed by imports given that The Bahamas brings in virtually everything it consumes. As a result, imports leapt by $357.1m or 10.3 percent to a new five-year high of $3.84bn as opposed to $3.483bn the year before.

The $3.84bn represents foreign exchange that The Bahamas has to generate through a surplus on its capital account, representing monies earned by services exporters such as tourism and financial services, to fund those imports. Between 2018 and 2022, the trade deficit peaked at just shy of $3bn in 2018, with imports reaching a pre-2023 high of $3.524bn that year.

"Data on merchandise trade for the year 2022 show that the value of commodities imported into The Bahamas totaled $3.8bn, resulting in an increase of 10.3 percent between 2021-2022," the 2022 trade report said.

"The category of 'food and live animals, which totalled $690.4m accounted for 18 percent of the imports in 2022. This category had an increase of 7.7 percent from 2021 which totalled $690.4m. This was followed by 'mineral fuels, lubricants and related materials’ totalling some $686.2m (17.9 percent of all imports) for 2022.

"Other major categories that contributed to imports were the categories of ‘machinery and transport equipment’, which totalled $684.6m representing 17.8 percent of total imports; ‘miscellaneous manufactured articles’, which accounted for 13.6 percent with a total of $520.4m; and ‘manufactured goods’, which totalled $517.3m, also representing 13.5 percent of all imports for 2022."