Despite government plans to implement value added tax (VAT) and the planned opening of Baha Mar, Wall Street continues to see the “risks tilted to the downside” for the Bahamian economy, with an “open question” remaining as to whether Baha Mar will “substitute” rather than “complement” Atlantis and whether the government will be successful in implementing VAT alongside other key policy measures, according to a key analyst.<\/p>\n
Commenting in the wake of credit rating agency Standard & Poor’s (S&P) affirmation of The Bahamas BBB\/A-2 rating and \u201cnegative\u201d outlook, primary credit analyst for The Bahamas Dr. Lisa Schineller said the agency is confident the government has a \u201cplan to turn the trajectory\u201d of its deficit and debt positions around.<\/p>\n
However, Schineller pointed to the question of whether VAT\u2008will be implemented, the possibility of any revenue-based erosion, the ability to implement other measures to contain expenditure, and the \u201crisks\u201d associated with the potential for Baha Mar to successfully grow the Bahamian economy as factors feeding into the continued \u201cnegative\u201d outlook for the economy.<\/p>\n
Noting that the government has given no indication to the credit rating agency that it intends to postpone the implementation of VAT \u2013 as has been proposed by the Bahamas Chamber of Commerce and Employers Confederation (BCCEC) on behalf of its private sector members \u2013 Schineller indicated that the agency would keep a close eye on what happens with implementation of the new tax regime.<\/p>\n
And she emphasized that VAT\u2008alone cannot solve The Bahamas\u2019 problems.<\/p>\n
\u201cObviously it needs to be alongside continued expenditure containment, and then the potential is there that this can turn around the fiscal trajectory, but there are still downside risks,\u201d she said.<\/p>\n
\u201cFirst of all it hasn\u2019t been implemented; it\u2019s being discussed we don\u2019t have legislation on it yet. The game plan is to have discussions in coming weeks, moving on to passing something early next year and the goal of implementation in the middle of next year.<\/p>\n
\u201cWe would be watching the time profile in terms of if targets get changed or not but also the accompanying policies the government is also looking at improving and expects to gain additional revenue from.\u00a0 We\u2019ll be looking at a variety of things that could go alongside a VAT in terms of delivery. VAT, if implemented along with other factors such as not spending all the revenue, and a group of policies focused on better revenue generation, can bring down debt burden and turn the fiscal deficits onto a declining trend.\u201d<\/p>\n
Asked if postponement of VAT\u2008could impact the agency\u2019s rating of the Bahamian economy, or its outlook, Schineller said this would depend on the \u201ccontext of the postponement\u201d.<\/p>\n
\u201cWe would have to look at what would be the countervailing measures. It would have to be taken in a broader context \u2013 how long, how much and what else happens in the interim.\u201d<\/p>\n
In its release accompanying the affirmation of The Bahamas BBB\/A-2 rating on Wednesday, S&P said it could lower its rating on The Bahamas by \u201cone or two notches if the administration does not take additional action to reduce The Bahamas’ fiscal deficit and arrest the increase in debt to GDP over the next several years\u201d.<\/p>\n
However, it said that the outlook could be upgraded to \u201cstable\u201d if there is \u201ceffective tax reform\u201d\u2008or if Baha Mar \u201cproduces greater economic growth with more positive fiscal and external spillovers than we currently expect\u201d. A \u201cnegative\u201d\u2008outlook is given if there is a greater than one in three chance of a downward adjustment in the rating.<\/p>\n
Speaking with Guardian Business, Schineller echoed the uncertainty expressed by some in the Bahamian private sector about the potential impact of Baha Mar on the economy, and therefore on the government\u2019s overall fiscal position in the medium to long term.<\/p>\n
\u201cThe view or hopes are that it will add more robustness to the growth outlook, but it is somewhat of an open question. Certainly the government doesn\u2019t think so and Baha Mar doesn\u2019t think so, but how much there might be substitution as opposed to complementing Atlantis is something we\u2019ll see over time, and we\u2019re aware there are risks there, so we\u2019re not seeing a rapid growth trajectory in the longer term forecast,\u201d she said.<\/p>\n
\u201cThere\u2019s the question of whether they can bring in a different profile of tourists. Baha Mar is looking not so much at the family orientation but more for single tourists or more Asia-focused and that could very well be an alternative anchor for growth, but we\u2019d also highlight it\u2019s an open question.<\/p>\n
\u201cYou\u2019ve got the whole airlift question, and then there are the infrastructure pressures. Can the island manage and effectively have a complement to Atlantis or will there be some substitution? I think we do have growth over a couple of years out, but we don\u2019t have it doubling and part of that is that there is somewhat of an open question.\u201d<\/p>\n
\u201cWe\u2019ll only know with time.\u201d<\/p>\n
Source:\u00a0 Nassau Guardian<\/strong><\/em><\/span><\/p>\n","protected":false},"excerpt":{"rendered":" Despite government plans to implement value added tax (VAT) and the planned opening of Baha Mar, Wall Street continues to see the “risks tilted to the downside” for the Bahamian economy.<\/p>\n","protected":false},"author":17,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"rop_custom_images_group":[],"rop_custom_messages_group":[],"rop_publish_now":"initial","rop_publish_now_accounts":{"facebook_10223285771444175_51037792744":""},"rop_publish_now_history":[],"rop_publish_now_status":"pending","footnotes":""},"categories":[3],"tags":[27,153,29,556],"class_list":["post-42671","post","type-post","status-publish","format-standard","hentry","category-business","tag-baha-mar","tag-business-2","tag-economy","tag-vat"],"_links":{"self":[{"href":"https:\/\/www.bahamasb2b.com\/news\/wp-json\/wp\/v2\/posts\/42671","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bahamasb2b.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bahamasb2b.com\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bahamasb2b.com\/news\/wp-json\/wp\/v2\/users\/17"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bahamasb2b.com\/news\/wp-json\/wp\/v2\/comments?post=42671"}],"version-history":[{"count":0,"href":"https:\/\/www.bahamasb2b.com\/news\/wp-json\/wp\/v2\/posts\/42671\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.bahamasb2b.com\/news\/wp-json\/wp\/v2\/media?parent=42671"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bahamasb2b.com\/news\/wp-json\/wp\/v2\/categories?post=42671"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bahamasb2b.com\/news\/wp-json\/wp\/v2\/tags?post=42671"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}