Caribbean Export OUTLOOK 2016

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

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

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.

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.

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%.

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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