The Tribune

By NEIL HARTNELL

and FAY SIMMONS

Tribune Business Reporters

The World Bank has gone in the opposite direction to the International Monetary Fund (IMF) by trimming its 2024 economic growth forecast for The Bahamas by a further 20 basis points to 1.8 percent.

In contrast to its sister agency, which raised its economic growth projections for The Bahamas by half a percentage point to 2.3 percent after the latest Article IV review mission, the World Bank lowered its 2024 forecast from the 2 percent expansion it had predicted as recently as June 2023.

The latter also cut its 2025 gross domestic product (GDP) growth forecast for The Bahamas by 0.3 percent to 1.5 percent, implying that it expects this nation to revert to historical relatively low economic expansion rates following the post-COVID recovery and notwithstanding the country’s still-strong tourism performance.

Gowon Bowe, Fidelity Bank (Bahamas) chief executive, yesterday said that - rather than focus on the discrepancies between the IMF and World Bank estimates - The Bahamas should instead focus on generating the consistent, sustained higher GDP growth rates necessary to further slash unemployment and eliminate the annual fiscal deficit.

“I think the key message is that we know we need growth somewhere in the region of 5 percent to make significant strides in employment or debt level,” he told Tribune Business. “Whether it’s 1.8 percent or 2.3 percent is relatively minimal compared to where we need it to be and compared to what we see in other tourist destinations; they’re projecting 4 percent and higher for the Caribbean.”

Suggesting that the differences between the IMF and World Bank estimates may reflect difficulties in them gaining access to accurate and timely economic data on The Bahamas, Mr Bowe said the numbers had to be seen in the context they are merely forecasts. “I wouldn’t see that there’s any reason to hold your hat on either one in terms of the forecast,” he added.

The World Bank, in its economic outlook for Latin America and the Caribbean, said: “The region continues to face challenges, some of them long-standing, and the global environment will remain adverse overall. High global interest rates exacerbate service on the increased debt contracted during the crisis and governments struggle with fiscal space.

“Delayed progress on inflation in the Group of Seven (G7) will likely lead to sluggish growth over the medium term; China’s growth juggernaut has stumbled; and commodity prices have softened. However, the anaemic growth prospects for Latin America and the Caribbean are not collateral damage from the pandemic but reflect long unaddressed structural issues.

“Addressing these issues against the backdrop of adverse global economic conditions requires a social consensus that needs to improve as citizens report dissatisfaction with government performance and elected officials do not retain popular support. Household income losses from the pandemic have not been fully recovered, especially for the middle class, and the social fabric remains stretched.”

The World Bank noted that government spending, interest on public debts and taxation policies have played a role in generating high debt levels in the region.

It said: “Latin American and Caribbean countries are running fiscal deficits on average of 2.7 percent of GDP. This is a consequence of cyclical factors such as the persistent public expenditure associated with the pandemic and the anaemic growth of some countries, as well as structural factors such as taxing capacity, permanent government spending and interest payments on public debt.

“This situation requires the governments of the region to take measures to ensure the sustainability of public finances over the long term… the increased debt levels call for even more active measures considering that governments in Latin America and the Caribbean have, on average, low revenues by international standards and they pay a large fraction of their revenues as interest on their debt.

“Debt was increasing even before the pandemic, but its burden accelerated after the policy response during the pandemic. While most countries have been aiming at fiscal consolidation, only a handful of them have successfully decreased their stock of debt. Although most have improved their primary balance, debt service has been increasing given inflation and the trends on the global economy.”