Caribbean Export OUTLOOK 2016 - 2017

Pulse OF THE CARIBBEAN

The Bahamas is one of the richest countries in the Caribbean region, with a Gross National Income (GNI) per capita of approximately US$20,000. The economy is underpinned by tourism, a sizeable ship registry – among the largest in the world in terms of gross tonnage registered – and a vibrant offshore financial sector. However, the last few years have been challenging for the economy in the aftermath of the global financial crisis. The economy shrunk by 2.3% in 2008 and by 4.2% in 2009. Since then, the recovery has been slowanduneven. The economy has recorded growth, but the best performance came in 2012 with a 2.2% expansion. In the last two years, 2013 and 2014, growth regressed to 0.02% and 1% respectively. The offshore financial industryrecoveredwell,with anincreaseinthenumberof trusts and banks registered, but the performance of the high-value stopover tourism sector has been a concern. In 2006, total arrivals amounted to 1.6 million, but by 2009 that figure had fallen to 1.3 million. In 2014, the number was 1.4million. Stopover arrivals have been hit by a slowdown in growth and demand from the vitally important US market (accounting for about 80% of all arrivals), greater competition from other Caribbean destinations, and some decline in airlift and room capacity. In response, the government has backed several tourism promotion initiatives, such as the Companion Fly Free programme. It is hoped that with an increase in tourist arrivals, continuing strong

performance in the offshore financial services sector, and a healthy level of construction activity, growth will increase to 2.8% in 2015 – the best figure for almost a decade. It is anticipated that with a more rapidly growing economy, the unemployment rate will decline; so farithasnot.Unemploymentwas7.6%in2006and since 2009 it has hovered around 15%. The tepid recoveryhasnotbeensufficienttosignificantlyboost thedemandforlabour.Anotheroutcomeoftheslow recoveryhasbeenthedecliningfiscalposition.Since 2009, the government has been running relatively

period, the balance of trade deficit also fell, but picked up from 2011 when imports recovered. Despite a sizeable services trade balance the Bahamas runs a large current account deficit, which amounted to 22.1% of GDP in 2014. The key trading partner for the Bahamas is the US, representing over 80% of total trade. Other important export markets are the UK, France, and Canada, while sizeable imports come from Puerto Rico, and Trinidad and Tobago. Trade between the Bahamas and Caribbean Community (CARICOM) countries is very small,

with the region representing only 2.6% of total imports and less than 0.25% of exports; and the range of products traded is limited – primarily oil products imported from Trinidad and Tobago and sea salt exported to Jamaica.

It is anticipated that with a more rapidly growing economy, the unemployment rate will decline; so far it has not. Unemployment was 7.6% in 2006 and since 2009 it has hovered around 15%.

Although the Bahamas economy is improving, assisted by the US recovery, growth is still relatively anaemic, unemployment remains high, and both the level of debt and current account deficit need to be tackled. In response, the International Monetary Fund (IMF) has suggested a range of reforms, including finalising and implementing the National Development Programme to accelerate medium-to-long-term economic and social development, and the diversification of the economy. It has also urged the government to ease restrictions on labour mobility and tomodernise the state-owned energy sector, as power outages are a growing problem. So although the economy is improving, further action is required to make the recovery truly sustainable.

high fiscal deficits, although they have fallen from 6.7% in 2012 to 4.8% in 2014, assisted by higher business and professional fees. Another step towards greater fiscal consolidationwas the launch of a 7.5%Value Added Tax (VAT) in January 2015 (although the original planwas for a 15% rate). The introduction of VAT has been complemented by efforts to strengthen tax efficiency and collection. Nonetheless,publicdebtisstillgrowing,andisclose to 70% of GDP; in 2005, the figure was 35%. The country’s trade profile was also affected by the global financial crisis and the subsequent slow recovery. Both the value of imports and exports declined after 2008 and it was not until 2011 that a full revival was seen. During this

Dr. Peter Clegg is a Senior Lecturer in Politics at the University of the West of England, Bristol. He has been a Visiting Fellow at the Institute of Commonwealth Studies in London, and a Visiting Research Fellow at the Sir Arthur Lewis Institute of Social and Economic Studies (SALISES) at the University of the West Indies in Jamaica.

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