More economic woes for The Bahamas predicted
By ALISON LOWE
Tribune Staff Reporter
alowe@tribunemedia.net:
A FORMER minister of state for finance and local business people yesterday expressed concern about the possibility of a “double dip” recession in the United States further prolonging the economic woes of The Bahamas.
Their comments came on the heels of the latest report on Gross Domestic Product, the output of goods and services that indicates the performance of an economy, in The Bahamas’ main tourist market, the United States.
The report showed that the US economic recovery is losing steam, with GDP growth slowing quite markedly in the second quarter of the year, to 2.4 per cent, in comparison to the average 4.4 per cent rate recorded over the past six months, and the greater 3.7 per cent pace recorded for the first quarter of the year.
The slowdown was attributed to what former minister of state for finance James Smith called a key factor for The Bahamas - a fall in the rate of growth in spending by US consumers, from 1.9 per cent in the first quarter to 1.6 per cent in the March to June period.
Even as people in the US continue to suffer from higher unemployment, lower household wealth linked to a decline in the value of stocks and housing, tighter credit lending conditions and the need to reduce debt and bolster savings, many US commentators expressed surprise at the consumer spending figures.
While some international economists said they did not believe the new economic figures suggested the likelihood of a further outright contraction in the US economy - a “double dip recession” - some see this on the horizon. Others suggest that if not a further recession, there remains the potential for an even greater slowdown in the economic growth rate in the United States as the year continues, with all of the implications that will have for The Bahamas in terms of a stagnation or even a further drop off in the visitor arrivals that feed the local economy.
Mr Smith said: “Any news about the US economy slowing down is really not good news for us because it prolongs our recovery but the really important numbers in there relate to consumer spending and consumer confidence. Those really affect The Bahamas and so if they are down that is really not good news for us.
“We need not to hope not just for a recovery in the US but in terms of how the US consumer perceives himself against the economy,” said Mr Smith, also chairman of investment and financial services company, CFAL.
He said that even if the growth rate does not drop any further, the decline that has been registered in the US in this quarter will be felt in The Bahamas.
“I think it does have very serious implications for us,” said Mr Smith. “It would be a delayed affect because one begins to make travel plans three, six months in advance, so someone who intends to come here this winter may cancel that or forego it even if you have fourth quarter (economic) growth.”
Meanwhile, Mr Smith noted that The Bahamian economy is facing its own issues going forward as local businesses deal with the widely-publicised increases in a number of taxes within the 2010/2011 budget.
“The budget was crafted against certain realities like growing debt and unemployment and an attempt to reduce the deficit. That would be in right direction except in my view it was too much ... I think a lower dose over longer period of time might have been the better option,” said Mr Smith of the budgetary measures introduced by the Government in July and their potential impact on Bahamian economic activity.
Chamber of Commerce President Khaalis Rolle told The Tribune that he views the latest figures coming out of the US as a “real concern” for The Bahamas.
“I keep saying you need almost simultaneously both consumer confidence and investor confidence to come back to get this economy back on track. Investor confidence fuels jobs, consumer confidence is fuelled by the prospect of employment and there hasn’t been any major indicator to suggest they were coming back strongly,” said Mr Rolle.
Given that the majority of The Bahamas visitors from the US are “middle class Americans” who usually save or borrow to go on vacation, Mr Rolle said he sees the potential for “our (tourism) numbers to begin to be impacted again” based on the latest economic indicators coming out of the US - yet another reason, he added, to diversify the Bahamian economy away from its dependence on the US tourist market.
Meanwhile, speaking of a potential double dip recession, Mr Rolle said: “The second time round usually isn’t as bad because people won’t react with level of panic they did when crisis first hit.
“We saw at the beginning of the crisis how all of major resorts started to lay off people so if there is a double dip recession it may not be as hard as initial hit can guarantee you there will be some impact.”
A Government economic source, speaking off the record, said that in his opinion the figures do not likely herald another recession but just another indicator that the US economic recovery, and hence The Bahamas, is going to be slow and protracted in comparison to others historically.
He added that it may be too early to say if the economic figures presage a further recession, as they only represent economic activity in one quarter of the year.
“On the path to recovery there are many ups and downs. The key thing to realise is the reality is what you had is a financial collapse. In 2001 the recession lasted six or nine months, so you’re looking at least a year or two longer than that,” he suggested.
Asked whether in his view the 2010/2011 Budget was crafted with the potential for a double dip recession in the US in mind, the source said: “I think the budget reflects fact that the recovery period is uncertain, it’s a move towards fiscal consolidation.”
August 03, 2010
tribune242
A political blog about Bahamian politics in The Bahamas, Bahamian Politicans - and the entire Bahamas political lot. Bahamian Blogger Dennis Dames keeps you updated on the political news and views throughout the islands of The Bahamas without fear or favor. Bahamian Politicians and the Bahamian Political Arena: Updates one Post at a time on Bahamas Politics and Bahamas Politicans; and their local, regional and international policies and perspectives.
Showing posts with label Bahamas deficit. Show all posts
Showing posts with label Bahamas deficit. Show all posts
Wednesday, August 4, 2010
Tuesday, July 27, 2010
Bahamas Economy Is In A Depression says Veteran Banker Al Jarrett
Economy In Depression
By Kendea Jones:
Veteran banker Al Jarrett said yesterday that the country is really in a depression rather than in a recession because there has been no positive growth in the country for two consecutive years.
What’s worse, according to Mr. Jarrett is that the country’s may not recover next year.
"A recession is a down swing but it comes back in at 12 months. It started in 2008 and 2011 is headed in that direction. The government has yet to give you what the negative growth is in 2010 and this year is just as bad as last year in terms of the deficits and debts," he said while appearing on the Love97/JCN programme "Jones and Company".
Mr. Jarrett said he has been following financial reports from the government closely and that he is convinced that the deficit is higher than has been reported by the government.
"Based on the government’s numbers as I see them we are looking at 4 per cent GDP. I deal with the facts that come out of the government agencies themselves. The problem is the government has been [misrepresenting] the figures. Last year, they showed the wrong debt structure when they did the budget and this year they showed the wrong GDP. Moody’s Credit Rating just corrected the government the other day. When the agency saw that, it put (government) on notice that the national debt is going to be 64 per cent."
To prove his point Mr. Jarrett said most countries use one formula to calculate their GDP.
"If you have a declining GDP that comes from the existing GDP and it is deducted. If the GDP is increasing it is added. The International Monetary Fund (IMF) says the GDP is 5 per cent, the government says its 4.3 per cent Moody’s says its 4.5 per cent, the Central Bank says its 5 and that’s in 2009," he explained.
"Now in 2010, the figures aren’t even out yet and the government is saying it is 0.5 per cent and Moody’s is saying it is 1 per cent. I am saying it is three per cent based upon on what they are saying," Mr. Jarrett said. "They have not produced a number that was correct in three years because they put the wrong numbers in from the beginning."
Government debt at the end of June 2011 is projected to stand at 49.2 per cent of GDP, up from 47.3 per cent a year earlier, according to officials.
When asked by host Wendall Jones if political affiliation to the Progressive Liberal Party (PLP) had anything to do with his findings, Mr. Jarrett quickly dismissed that assertion.
"It’s sad when Bahamians get to the point when they cannot engage you intellectually. I can’t deal with people who make statements like that because I deal with facts. I can’t respond to that. I am one of the freest Bahamians in this country. I never lied to the Bahamian public in television or radio. If I have to lie on the behalf of a political party then that party does not deserve to be in office," he said.
Mr. Jarrett also said it is clear that the government did not present a budget that was in the best interest of Bahamians.
"I think that the government made a mistake or it was too lazy to produce a budget that was all encompassing and affecting the country and its people. They were concerned about the offset budget to impress the IMF that they were doing something about the mounting debts of $1 billion plus dollars and they were told they had to stop borrowing," Mr. Jarrett said.
"Now they have to offset projects. The government has put itself in a position where the international agencies are now looking at them very closely because they came close to the edge with the over-borrowing and record deficits and debts."
The veteran banker said he believes that international agencies dictate the government’s budget.
"They are following the dictates of the international agencies and the IMF because they are saying to the government that ‘if you don’t stop what you are doing we are going to downgrade you,’" Mr. Jarrett said.
"The agencies are also saying that ‘you are going to be downgraded unless you start putting out realistic budgets that makes sense and can be achievable. You are overstating your revenues and you are increasing your expenditure based on false revenues."
Mr. Jarrett said if he were minister of finance, international financial watchdogs would have no need to make these kinds of statements.
"I would not have gone on a borrowing binge unless I had a real stimulus. I would have made sure that if I produced a budget, on the revenue side it would have been more conservative and more realistic to reflect the times we are in," he said.
"Once you have the experience and the knowledge to understand the financial market and microeconomics you would know these things."
State Minister for Finance Zhivargo Laing was quick to shoot down Mr. Jarrett’s assertion by saying the veteran banker is the one who is mistaken.
"That is just utter nonsense," he said when contacted by the Journal. "The problem with what Al Jarrett says is that he is speaking to GDP over a calendar year from January to December but the fiscal year runs from July to June. So what happens is that you have to do an average of the GDP over two halves of a calendar year to capture what the GDP would be over a fiscal period."
"When he suggest that we did not include the contraction of last year and this year, he has no clue that in a fiscal period you have to calculate over the 12 -month period in the fiscal year."
The minister also expressed confidence that the economy will begin to rebound next year.
"What we are forecasting and what the IMF is forecasting is that there will be some improvement next year over this year" Minister Laing said.
The government’s $1.8 billion came into effect on July 1.
The budget allocates some $1.55 billion for recurrent expenditure and more than $265 million for capital expenditure.
The government is however determined to tighten the rein on revenue collection.
Getting its fiscal house in order has also forced the government to roll out tough cuts to public spending and a raft of tax increases.
Immediately after doing so, the Opposition slammed the new fiscal plan as a "tax and pain budget" that would only put more pressure on the backs of Bahamians.
But Minister Laing insists that the government is doing what it can to cut the deficit.
"It is in the interest for the people of the Commonwealth of The Bahamas and generations of Bahamians to be able to have our deficit reduced and borrowing reduced because it helps us to position ourselves in the event that something else should happen in the future," he said. "Al Jarrett’s comments are often laced with his own political agenda."
July 26th, 2010
jonesbahamas
By Kendea Jones:
Veteran banker Al Jarrett said yesterday that the country is really in a depression rather than in a recession because there has been no positive growth in the country for two consecutive years.
What’s worse, according to Mr. Jarrett is that the country’s may not recover next year.
"A recession is a down swing but it comes back in at 12 months. It started in 2008 and 2011 is headed in that direction. The government has yet to give you what the negative growth is in 2010 and this year is just as bad as last year in terms of the deficits and debts," he said while appearing on the Love97/JCN programme "Jones and Company".
Mr. Jarrett said he has been following financial reports from the government closely and that he is convinced that the deficit is higher than has been reported by the government.
"Based on the government’s numbers as I see them we are looking at 4 per cent GDP. I deal with the facts that come out of the government agencies themselves. The problem is the government has been [misrepresenting] the figures. Last year, they showed the wrong debt structure when they did the budget and this year they showed the wrong GDP. Moody’s Credit Rating just corrected the government the other day. When the agency saw that, it put (government) on notice that the national debt is going to be 64 per cent."
To prove his point Mr. Jarrett said most countries use one formula to calculate their GDP.
"If you have a declining GDP that comes from the existing GDP and it is deducted. If the GDP is increasing it is added. The International Monetary Fund (IMF) says the GDP is 5 per cent, the government says its 4.3 per cent Moody’s says its 4.5 per cent, the Central Bank says its 5 and that’s in 2009," he explained.
"Now in 2010, the figures aren’t even out yet and the government is saying it is 0.5 per cent and Moody’s is saying it is 1 per cent. I am saying it is three per cent based upon on what they are saying," Mr. Jarrett said. "They have not produced a number that was correct in three years because they put the wrong numbers in from the beginning."
Government debt at the end of June 2011 is projected to stand at 49.2 per cent of GDP, up from 47.3 per cent a year earlier, according to officials.
When asked by host Wendall Jones if political affiliation to the Progressive Liberal Party (PLP) had anything to do with his findings, Mr. Jarrett quickly dismissed that assertion.
"It’s sad when Bahamians get to the point when they cannot engage you intellectually. I can’t deal with people who make statements like that because I deal with facts. I can’t respond to that. I am one of the freest Bahamians in this country. I never lied to the Bahamian public in television or radio. If I have to lie on the behalf of a political party then that party does not deserve to be in office," he said.
Mr. Jarrett also said it is clear that the government did not present a budget that was in the best interest of Bahamians.
"I think that the government made a mistake or it was too lazy to produce a budget that was all encompassing and affecting the country and its people. They were concerned about the offset budget to impress the IMF that they were doing something about the mounting debts of $1 billion plus dollars and they were told they had to stop borrowing," Mr. Jarrett said.
"Now they have to offset projects. The government has put itself in a position where the international agencies are now looking at them very closely because they came close to the edge with the over-borrowing and record deficits and debts."
The veteran banker said he believes that international agencies dictate the government’s budget.
"They are following the dictates of the international agencies and the IMF because they are saying to the government that ‘if you don’t stop what you are doing we are going to downgrade you,’" Mr. Jarrett said.
"The agencies are also saying that ‘you are going to be downgraded unless you start putting out realistic budgets that makes sense and can be achievable. You are overstating your revenues and you are increasing your expenditure based on false revenues."
Mr. Jarrett said if he were minister of finance, international financial watchdogs would have no need to make these kinds of statements.
"I would not have gone on a borrowing binge unless I had a real stimulus. I would have made sure that if I produced a budget, on the revenue side it would have been more conservative and more realistic to reflect the times we are in," he said.
"Once you have the experience and the knowledge to understand the financial market and microeconomics you would know these things."
State Minister for Finance Zhivargo Laing was quick to shoot down Mr. Jarrett’s assertion by saying the veteran banker is the one who is mistaken.
"That is just utter nonsense," he said when contacted by the Journal. "The problem with what Al Jarrett says is that he is speaking to GDP over a calendar year from January to December but the fiscal year runs from July to June. So what happens is that you have to do an average of the GDP over two halves of a calendar year to capture what the GDP would be over a fiscal period."
"When he suggest that we did not include the contraction of last year and this year, he has no clue that in a fiscal period you have to calculate over the 12 -month period in the fiscal year."
The minister also expressed confidence that the economy will begin to rebound next year.
"What we are forecasting and what the IMF is forecasting is that there will be some improvement next year over this year" Minister Laing said.
The government’s $1.8 billion came into effect on July 1.
The budget allocates some $1.55 billion for recurrent expenditure and more than $265 million for capital expenditure.
The government is however determined to tighten the rein on revenue collection.
Getting its fiscal house in order has also forced the government to roll out tough cuts to public spending and a raft of tax increases.
Immediately after doing so, the Opposition slammed the new fiscal plan as a "tax and pain budget" that would only put more pressure on the backs of Bahamians.
But Minister Laing insists that the government is doing what it can to cut the deficit.
"It is in the interest for the people of the Commonwealth of The Bahamas and generations of Bahamians to be able to have our deficit reduced and borrowing reduced because it helps us to position ourselves in the event that something else should happen in the future," he said. "Al Jarrett’s comments are often laced with his own political agenda."
July 26th, 2010
jonesbahamas
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