The Tribune

By NEIL HARTNELL

TRIBUNE Business Editor

nhartnell@tribunemedia.net

A BAHAMIAN economist is asserting the Government “got off easy” in Standard & Poor’s (S&P) latest analysis while warning the country could “be in for a bit of a hard landing” with the rating agencies next year if does not “put its house in order”.

Therese Turner-Jones, who from 2017 to 2021 served as general manager for the Inter-American Development Bank’s Caribbean group country department, told Tribune Business that both S&P and Fitch, albeit in a very “nuanced” way, have sounded the alert over “off balance sheet” spending by the Government and governance concerns linked to the National Investment Fund’s (NIF) management.

She added that the duo appeared to be on the same page over the likelihood that the Government will miss its forecast Budget surpluses for both the prior fiscal year, as well as the current 2026-2027 period, plus the dangers posed by all the guarantees provided to underwrite debt repayments by loss-making state-owned enterprises (SOEs).

Ms Turner-Jones told this newspaper that, unlike S&P, the latest update by Fitch had picked up on The Bahamas’ “over-reliance” on lower-spending cruise ship passengers to drive its tourism and economic growth. Backing its assessment, she added that while this segment may deliver visitor arrivals volume, too many Bahamians feel the nation is “not getting value because they are not feeling it in their pocket”.

She was backed yesterday by Kwasi Thompson, the Opposition’s finance spokesman, who argued that Fitch’s assertion that reliance on cruise tourism reduces the economic impact and benefits of the country’s largest industry for Bahamian families must serve as “a wake-up call”. And, amid renewed cost of living pressures, with July’s inflation rate pegged at 3.64 percent, he reiterated that tourism’s success must be measured by impact and not arrivals numbers.

Ms Turner-Jones, meanwhile, branded S&P’s assessment “very light” given the multiple controversies and concerns that have emerged since the May 12 general election surrounding, in particular, the National Investment Fund, and whether an account(s) in its name have been used to keep almost $311m worth of spending off the Government’s balance sheet so it does not blow its revised $33m 2025-2026 surplus target and have to submit a corrective plan to Parliament.

“I think they are very fortunate, respectfully, given all the stuff that has come out since April,” she told Tribune Business. Ms Turner-Jones said that, while S&P had clearly picked up on concerns regarding this “off balance sheet” spending and contingent liabilities facing Bahamian taxpayers from SOEs, “everything is extremely nuanced” and has to be dug out by persons reading its report.

“The messages are all there; SOEs, the increase in debt, off balance sheet items,” she added. “They say it, but not explicitly… This is probably one of the least analytical S&P reports that I have read in a long time. It’s not rigorous. It’s a very uncritical version. This is a very light report.

“They [the Government] got off easy. Maybe they have more evidence on the contingent liabilities, there’ll be clarity on whether these deficits materialise as they estimate or higher. I think it’s going to be difficult for this administration to get those numbers. There’s so much uproar about how they are operating right now. The National Investment Fund is just one example. There are a lot of things going on that are not transparent. I find it unacceptable.”

Amid all the concerns, the Government will be buoyed by the fact that S&P reaffirmed The Bahamas’ existing ‘BB-’ credit rating and imposed a ‘stable’ outlook on the country’s finances, meaning no downgrade is likely within the next 12-18 months. Yet this also means that no upgrade is likely, and The Bahamas remains stuck in so-called ‘junk’ status and some three notches below investment grade.

Fitch, though, in its latest Bahamas update published just days after S&P released its annual review, was more pointed and direct in raising many of the concerns flagged by the latter. It signalled it is aware of the ongoing National Investment Fund (NIF) saga and other controversies by asserting that “governance and transparency” have become “potent concerns” since the May 12 general election.

“There’s is more crisp, it’s more succinct. It gets to the point,” Ms Turner-Jones said. “They are saying some of the things I have been saying, this over-reliance on cruise tourism, no Budget surplus in sight. What’s worrisome is that these numbers are all over the place. Why is it taking our government so long to put out the year-end fiscal numbers [for 2025-2026]? Both suggest we will be in for a bit of a hard landing next fiscal year.”

Fitch is forecasting that, rather than a $32.7m surplus for the 2025-2026 fiscal year, which the Government revised downwards from the original $75.5m, there will instead be a deficit equal to 0.5 percent of gross domestic product (GDP). Based on the Government’s own data, that would translate into a deficit of around $75m or around $150m negative swing, measuring by how much its spending has exceeded revenue and tax income.

Fitch nevertheless hailed this as “the lowest deficit in 25 years”, but added also predicted the Government will miss the revised $291.4m surplus forecast for the present 2026-2027 year through a deficit that will come in at a slightly lower 0.4 percent of GDP before it finally hits its long sought-after surplus in 2027-2028. S&P, meanwhile, is forecasting an even higher deficit of 1.5 percent for the 2025-2026 fiscal year.

Ms Turner-Jones said of the Government: “If they are paying attention, they will definitely start to put their house in order. This is why you get these kinds of reports. They are essentially saying we know these things are going on. When we come to do the full rating next year you are not going to get away with this. A lot of this stuff happened after they left.”

Mr Thompson, too, said: “The latest Fitch report confirms what the Opposition and Fiscal Responsibility Council had already made clear: The Government’s promised surplus was slipping out of reach.

“We are therefore not surprised that Fitch now expects a 0.5 percent deficit instead of the budgeted 0.5 percent surplus. The warning signs were glaring. After nine months, Government still needed approximately $1.54bn in revenue in just three months, yet instead of tightening its belt, it increased planned spending by approximately $239m while also raising its revenue projection by $196.5m.

“The Fiscal Responsibility Council questioned these unexplained revisions. Now Fitch reports and the surplus has disappeared. Government was spending more while failing to collect what it promised and the surplus has disappeared. This was not a surprise, it was a fiscal warning that the Government chose not to heed.”

However, the Government may have a proverbial ‘ace up its sleeve’ if it can collect and book revenues from the 15 percent corporate income tax, which is retroactive to 2024, before end-June prior to the 2025-2026 Budget year-end. It has triple the number of taxpayers than originally thought, close to 30 as opposed to ten, which may put it in reach of the $330m that the Domestic Minimum Top-Up Tax is forecast to generate in the current 2026-2027 fiscal year.

Mr Thompson, meanwhile, seized on Fitch’s cruise tourism concerns to argue that the industry’s growth - and rapid expansion of its private island network - is not being felt by Bahamians in terms of greater activity for locally-owned businesses plus more job opportunities and higher incomes. “What is equally troubling is that record tourism numbers are not translating into enough economic benefit for Bahamians,” he said in a statement responding to Tribune Business inquiries.

“Fitch reports that arrivals increased by 14.8 percent, but cruise passengers now account for 84 percent of total arrivals, and specifically warns that our reliance on the less-lucrative cruise market reduces the economic and fiscal benefits of tourism. That should be a wake-up call.

“We cannot boast about record arrivals while Bahamian families struggle and too much of the tourism dollar passes through our economy without reaching our people. We need more Bahamian ownership, more opportunities, more training and more innovation so that tourism creates real wealth for ordinary Bahamians. The measure of tourism’s success cannot simply be how many visitors come to The Bahamas; it must be how much Bahamians benefit when they do.”

The cruise dominance may be even more than Fitch suggests. The Central Bank last week reported that sea visitors, including cruise passengers, again drove the expansion in arrivals to The Bahamas for the first seven months of 2026 by increasing 16.4 percent to 7.2m, while air traffic rose 5.8 percent to 1.2m. This meant cruise passengers accounted for 85.7 percent of all visitors to The Bahamas, although the growth in air arrivals suggests stopover tourism is far from done.

However, there have been signs of unease in the Bahamian tourism industry over the competitive threat posed by the explosive growth of the cruise lines, with multiple vessels that resemble floating hotels containing many of the same attractions and amenities as an Atlantis and Baha Mar, and more ships in the construction pipeline. And they are able to offer multiple experiences at much lower costs than Bahamas-based resorts and land-based attractions.

Stopover vacation spending is generally considered to be 28 times’ higher than that of cruise passengers, with many observers believing that the economic impact from the latter is increasingly being dulled by the lines’ growing use of their private island destinations.

Fitch, in its report, asserted: “Tourism arrivals expanded by 14.8 percent year-on-year in the first seven months of 2026, after going up by 11.4 percent in 2025 to 12.5m arrivals – the highest level ever.

“Cruise arrivals dominate, expanding 16.9 percent year on year in the first seven months of 2026 to 7.1m, or 84 percent of arrivals. While tourism will remain the main driver of the economy, The Bahamas’ reliance on the less lucrative cruise arrivals lessens the economic and fiscal benefits. The industry is working to expand monetisation of the cruise product….”

Mr Thompson, reiterating the Opposition’s call that Bahamians “need an economy that works for them”, also urged the Davis administration to explain Fitch’s assertion that the economy actually contracted during the 2025 fourth quarter although it acknowledged that growth has since resumed and there was no hint of a recession.

“Even more alarming is what is happening to the Bahamian economy,” the east Grand Bahama MP said. “Fitch reports that the economy actually contracted by 1.4 percent in the final quarter of 2025; the first quarterly contraction since 2020, and now forecasts growth falling sharply from 3.8 percent in 2025 to just 1.8 percent in 2026. This dramatic loss of economic momentum demands an explanation from the Government.

“At the same time, inflation accelerated to 4.2 percent in the second quarter of 2026, putting even greater pressure on Bahamian families already struggling with food, electricity, gasoline and the basic cost of living. The economy is slowing while the cost of living is rising. Government cannot simply point to headline economic numbers and tell Bahamians things are getting better when too many families are experiencing something very different.

“Even more alarming is what is happening to the Bahamian economy,” the east Grand Bahama MP said. “Fitch reports that the economy actually contracted by 1.4 percent in the final quarter of 2025; the first quarterly contraction since 2020, and now forecasts growth falling sharply from 3.8 percent in 2025 to just 1.8 percent in 2026. This dramatic loss of economic momentum demands an explanation from the Government.

“At the same time, inflation accelerated to 4.2 percent in the second quarter of 2026, putting even greater pressure on Bahamian families already struggling with food, electricity, gasoline and the basic cost of living. The economy is slowing while the cost of living is rising. Government cannot simply point to headline economic numbers and tell Bahamians things are getting better when too many families are experiencing something very different.

“Bahamians live in the real economy. They feel it at the food store, at the gas pump, in their electricity bills and in their pay cheques,” “The Government’s economic policy must therefore be judged by a simple test: Are Bahamians better able to afford their lives, build wealth and create a better future for their families?” Mr Thompson challenged.

“The Government must focus on easing the cost of living burden, creating more opportunities for Bahamians and ensuring that economic growth reaches the people who need it most. Our people need an economy that works for them.”