The economy of The Bahamas is showing significant indications that an economic recovery is strengthening, after a colossal effect of an economic recession. In the year 2008, The Bahamas tourism industry suffered a catastrophic decline as a result of a global economic crisis, which led to a rise in unemployment and business foreclosures. The economic condition began to deteriorate, weakening the banking institutions as a consequence. The Bahamas has maintained formidable levels of income per capita (US$21,529), which is produced by its tourism sector and its financial services institutions.
The government of The Bahamas has continually struggled with economic diversification, due to its inability to provide adequate infrastructural development throughout its islands, because of high cost. The Bahamas economy is recovering from a 10% decline in tourism arrivals in 2009, while the country’s foreign direct investment decreased by some 30%. Unemployment escalated from an estimated 9 percent to an estimated 14 percent, after the hotel industry, construction industry and private sector business was responsible for the quantity of layoffs.
The Bahamas economy is increasingly vulnerable, as countries in North America and Europe face seemingly increasing difficulties as they attempt to stabilize their nations’ economies by carrying out austerity measures and raising the debt ceiling to manage their countries’ debt in an attempt to prevent an occurrence of global economic crises. A reoccurrence of a global economic crisis threatens the capital inflow and tourism and export revenue. Along with other countries, the government of The Bahamas debt is a concern, as six months into the year 2010 showed the central government debt standing at an estimated 47 percent of the country’s GDP.
Despite The Bahamas rating being downgraded by S&P in the year 2009 and the Moody’s announcement of their consideration of decreasing the country’s rating, The Bahamas has continued to maintain a stable BBB+ long-term and A-2 short-term credit grade.
After two consecutive years of negative GDP growth in the year 2008 (-1.7) and 2009 (-4.3), the GDP was projected to grow in 2010, when the country’s GDP grew by 1.0 percent in the year 2010 and by 2.0 percent in the year 2011.This growth shows some evidence that the country’s economy is slowly recovering, as data show merger economic growth. The Bahamas growth prospects are projected to continue as data conclude a 2.5 percent growth in the years 2012 and 2013. This is evidence that The Bahamas is experiencing a very fragile economic recovery and the recovery can be triggered by any natural disaster or severe external shocks such as oil prices and food prices shocks, or even to a further extent a disruption in the global economic recovery. The central government debt to GDP is expected to approach 55 percent in the next four years.
The tourism industry of the Bahamas is experiencing tremendous growth in cruise ship arrivals, as the air arrivals are confronted with some challenges due to travel costs to The Bahamas. The tourism officials are in the process of expanding The Bahamas tourism product throughout Latin America and, in addition, capitalizing on domestic tourism. The banking institutions remain stabilized; as stress tests conducted suggest that the financial institutions in The Bahamas can resist deterioration in their loan portfolios, as the various institutions continue to comply with capital requirements.
The Bahamas government signed a trade agreement along with China to provide economic opportunities and benefits for its citizens. The government of The Bahamas along with the Inter-American Development Bank (IDB) has continually displayed its priorities that coincide with the bank’s strategy, such as providing energy, water and sanitation, transport, and SME development. IDB has financed the New Providence transport program to reduce transport costs for road users by providing a more rational and efficient transport system for New Providence Island. The project has contributed significantly to unemployment and business foreclosure in the areas where infrastructure work was occurring, despite the government’s continual encouragement of the public to patronize local business affected by the project development.
The Bahamas is slowly recovering, as unemployment is a challenge for the Bahamian government as they introduce initiatives and continue to partner with investors such as Bahia Mar and Albany to foster employment for its citizens. The island of Grand Bahama is facing an economic challenge of historic proportions and high unemployment levels. The Bahamas is projected to experience an increase in employment in the construction industry, but significant employment is not expected until second quarter of 2013 and the first quarter of 2014.
The government of The Bahamas should implement a tax system that would produce sustainable income to make the necessary investments in energy, education, health, agriculture and innovation. The government must prepare the country for a technological future, one in which its citizens will compete in a competitive economic market. The key to The Bahamas economic success is its ability to create an independent economy that provides stability to each one of its islands. Despite the economic challenges the government should never compromise the investment in the education and health of the country.
We are willing to make progress on the economic issues that confront us, but our ability to move on these issues will depend of course on how much progress we see from the government. A robust conversation is needed to discuss future economic development of our country and ways to vitalize development on the family islands.
Advisory Youth Council of The Bahamas