The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas was last night urged to identify its “future economic drivers” after the International Monetary Fund (IMF) slashed its 2024 growth projection for this nation to less than 2 percent.

The Fund, in unveiling its latest World Economic Outlook yesterday, cut this year’s gross domestic product (GFDP) growth forecast for The Bahamas by 40 basis points compared to the projection it gave almost 12 months - reducing it from 2.3 percent to 1.9 percent. And it also trimmed this nation’s projected 2025 growth from 1.8 percent to 1.7 percent, with 2029’s output expansion pegged at 1.5 percent.

The revised IMF forecast knocks around $56m off the Bahamian economy’s forecast expansion in 2024, based on figures provided in the 2024-2025 Budget. Gowon Bowe, the Clearing Banks Association’s chairman, last night told Tribune Business that the changed figures are not surprising given that annual GDP growth rates were always predicted to slow once the economy had completed its post-COVID rebound.

Conceding that the numbers are just forecasts, and warning against getting “too high on the highs and too low on the lows”, he nevertheless said the key issue remains identifying a new Bahamian economic growth driver either within this nation’s traditional industries such as tourism or new sectors.

While government policies may have played a role, Mr Bowe said much of the post-COVID rebound was the economy reflating “to where we were before” as it opened up and pandemic-related restrictions were eased.

“A more sensible conversation is saying: ‘What are the factors leading to increased growth?’,” he added. “We’ve not identified future economic drivers inside or outside tourism. Nothing comes to mind. That’s what the Government of the day has to answer: What is it that we expect to drive this growth you are talking about?”

Michael Halkitis, minister of economic affairs, did not respond to a Tribune Business message seeking comment before press time last night. However, the Opposition argued that the revised IMF numbers “raise significant and ongoing concerns” about the economy’s direction and signal “we are not on a strong and solid economic path”.

Kwasi Thompson, the Opposition’s finance spokesman and east Grand Bahama MP, said: “The Opposition notes the most recent forecasts from the International Monetary Fund (IMF) showing a decrease in the Bahamas’ GDP growth projections - from 2.3 percent to 1.9 percent for 2024, and from 1.8 percent to 1.7 percent for 2025, remaining at 1.5 percent for 2029.

“Although we acknowledge that even slight economic growth is a good thing, these changes raise significant and ongoing concerns about the direction of our country’s economy. The revisions downwards show that we are not on a strong and solid economic path, and that numerous Bahamians continue to encounter difficulties in their day-to-day lives.

“These forecasts emphasise the critical necessity for a forward-thinking economic plan. It is evident that the current PLP strategy does not instill the trust and drive necessary for strong growth. Our economy’s growth is not meeting the long-term demands of our country.”

The IMF is thus projecting that The Bahamas will return to what Mr Bowe described as the “lethargic” historical annual GDP growth it endured between the 2008-2009 financial crisis and COVID of between 1-1.5 percent.

Asserting that The Bahamas should “certainly take note” of the IMF revisions, he added that they come as no surprise given that both credit rating agencies, Moody’s and Standard & Poor’s (S&P), have trimmed their own forecast for this nation while the Central Bank has also been subtly signalling GDP expansion this year may be less than 2 percent.

S&P, in its recent Bahamas country assessment, said: “The Bahamas’ economy grew in 2023 at a more subdued pace, with GDP growth at 2.6 percent, given the dissipation of pent-up demand following the pandemic.

“However, The Bahamas’ tourism sector continued to perform very well, largely driven by a new cruise terminal in Nassau that opened in May 2023. Total arrivals in 2023 were 9.6m, compared with seven million the year before, which is about 132 percent of 2019 levels.

“We expect growth in 2024 to return to 1.8 percent, accounting for a soft landing in the US. GDP per capita is estimated at $36,490. The number of inbound arrivals reached 5.7m in the first half of the year, compared with five million during the same period in 2023,” S&P added.

“Despite good growth over the past two to three years, we expect growth to return to historical levels, which underpins our view of the sovereign’s below-average long-term growth performance compared with that of others at a similar level of development.”

Moody’s, meanwhile, in a note published last week, said: “The credit profile of The Bahamas is supported by the country’s ‘ba2’ economic strength, reflecting the Bahamian economy’s small size, subdued growth outlook dependent on tourism, high income levels and exposure to climate event risk.”