The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas must “flirt” with sustained annual economic growth of up to 3 percent to further slash structural unemployment and prove external forecasters wrong, the Central Bank’s governor said yesterday.

John Rolle told Tribune Business that consistently expanding economic output, or gross domestic product (GDP), by between 2-3 percent annually would have a “very large dollar impact” compared to the International Monetary Fund’s (IMF) 2024 and near-term projections for The Bahamas.

The Washington D.C-based Fund, in its latest World Economic Outlook report released last month, cut The Bahamas’ 2024 GDP growth forecast to 1.9 percent and projected that it will fall even further to 1.7 percent in 2025 and 1.5 percent in 2029 as this nation places the rapid post-COVID rebound firmly behind it.

Mr Rolle told this newspaper that the IMF’s growth forecasts were in line with those of the Central Bank, but pointed out that both this year’s and 2025’s projections remain above the 1.5 percent level that has long been considered The Bahamas’ historical average.

And he reiterated his belief that the country “has great potential” to increase tourism’s economic impact by capturing more visitor spending, and ensuring a greater share of this remains within its borders, by providing increased “local inputs” to replace the imported goods and services long relied upon by The Bahamas’ leading industry.

“I would say that, with the conversations and dialogue I see out there, the expectation is that you’re above 2 percent and maybe flirting with the 3 percent range,” Mr Rolle replied, when asked by Tribune Business about the level of sustained economic growth required to make persistent cuts in the 8.7 percent national unemployment rate.

“In an economy this size that’s very large in terms of the dollar impact and potential employment; between 2 percent and 3 percent,” the Governor added. “Definitely above 2 percent. When your rate is there, what it is saying is there’s a certain level of growth based on investment activity, and you’re typically seeing that, for example, when you have major resort development.

“I think we’ve also seen some of that growth when the residential real estate sector has a very large construction element in it.” Mr Rolle then confirmed that the IMF’s recently-unveiled growth estimates for 2024 and 2025 were aligned with the Central Bank’s given that the Bahamian economy’s rebound from COVID-19’s ravages is now complete.

“I think we’re in the same; our ranges overlap,” he said of the Central Bank and IMF. “We tend to have very detailed conversations with them. We compare notes very extensively, and try to reconcile where we can. Usually, the long-term [growth] potential for The Bahamas is still by some measures 1.5 percent. We’re still averaging above the average; we still have some field in front.”

With the Bahamian economy seemingly reverting to the historical growth rates it enjoyed between the 2008-2009 global recession and Hurricane Dorian/COVID-19, Mr Rolle said this nation must “at least be very attentive to what kind of activity has to be happening to give you a higher rate of return” as he called for a focus in extracting even greater earnings and economic impact from tourism.

“Tourism has great potential,” he added. “To fully capitalise on what we get out of tourism, it speaks to how we get those coming to do more and leave more in the economy, and also from the point of view of what they are presently doing. How do we get more of that to be local inputs; more local inputs?

“It means more labour resources are engaged, which is not the case for what we have to import for the industry. I’m not talking about the physical goods, but the service elements and other things people have utilised here.”

Mr Rolle, earlier addressing the 2024 third quarter briefing on the Bahamian economy’s performance and outlook, said workforce productivity and skills as well as more-targeted investment policies are key to driving the higher growth rates this country requires.

“I think if you want to have a sustained reduction in the unemployment rate, meaning not just reducing the rate from where we were in the pandemic, then on a sustained basis we have to expect that the rate at which the economy is generating jobs looks different, and we are growing at a faster rate,” he reiterated.

“But that also means we have to look at how to get the economy to grow faster, which ties into the skill sets we are developing and putting to use in the economy, as well as how we continue to scrutinise our policies around investment and the like to help facilitate growth.”

Confirming that the Bahamian economy will continue to expand through the end of 2025, albeit at a “more subdued pace” compared to the rates achieved post-COVID as the country regained output levels lost to the pandemic, Mr Rolle added that 2024’s growth will come in lower than the 2.6 percent recorded for 2023 by the Bahamas National Statistical Institute (BNSI).

“The Bahamian economy continued to expand over the first three quarters of 2024,” the Governor said. ‘However, the available indicators of growth slowed in comparison to 2023. These trends are further in line with the expected levelling off in gains since the economy completed its recovery from the pandemic.

“The indicators reflect slower growth in tourism earnings, due to constrained capacity in the stopover segment, and also moderation in the otherwise healthy cruise trends.” With foreign direct investment (FDI) continuing to support both construction and tourism activity, Mr Rolle added that The Bahamas was also starting to feel the benefit of lower inflation in the cost of imported goods and services.

Nevertheless, he confirmed: “For 2024, the real GDP growth rate in The Bahamas is expected to slow further below the estimated 2.6 percent recorded by the Bahamas National Statistical Institute (BNSI) for 2023.”