Economic Survey of Latin America and the Caribbean 2010-2011

According to ECLAC'S flagship publication, "Economic Survey of Latin America and the Caribbean" The Bahamian economy registered a modest recovery in 2010 with growth of 0.9% following a 5.4% decline in 2009. The economy benefited from a rebound in tourism triggered by the upturn in the United States, its major market. This rebound, together with buoyant activity in offshore financial services, helped to compensate for the weaker performance of the construction sector. Inflation declined as food and clothing prices fell. There are no official data, but employment, especially in tourism, was expected to pick up with the more buoyant economic activity. The fiscal situation deteriorated in fiscal year 2009/2010 as revenues declined more sharply than expenditure, but there was an improvement in 2010/2011. Meanwhile, the balance-of-payments current account deficit contracted moderately to 9.9% of GDP, as higher tourism receipts outweighed the increase in the trade deficit.
Source: ECLAC

Economic Survey of Latin America and the Caribbean 2009-2010
According to ECLAC's most recent survey recessionary conditions in the Bahamas deepened in 2009, with real GDP falling by 4.3%. Weakened tourism demand in major markets led to a decline in stay-over arrivals and reduced average spending. Value added in offshore financial services was also down due to the recession in major markets. The slump in activity caused unemployment to increase sharply to 14.2%. Inflation moderated to 1.3% because of declining oil and other commodity prices.
source: ECLAC

• Economic Survey of the Caribbean 2008-2009
  

The survey provides an overview of the economic performance of countries of the Caribbean Community (CARICOM) for the year 2008 and their outlook for 2009. The last chapter presents country briefs of the seven most developed countries (MDCs) in the Caribbean – Bahamas, Barbados, Belize, Guyana, Jamaica, Suriname and Trinidad and Tobago – together with a subregional assessment of the eight member countries of the Eastern Caribbean Currency Union (ECCU).
General Trends for Bahamas
The Bahamian economy contracted by 1.7% in 2008, relative to growth of 0.7% in 2007. The downturn in major markets, especially in the second half of the year led to a slump in demand for tourism services and a sharp fall in FDI that dampened construction activity. Real value added in financial services was buoyant in 2008. Reflecting the impact of higher fuel15 and food prices, inflation leaped far above trend from 2.9% in 2007 to 4.5%, in 2008.
One of the knock-on effects of the accelerated decline in activity in the second half of the year was a spike in unemployment to 12% at the end of December compared with 7.9% in May 2008.
source: ECLAC

• Economic Performance

According to ECLAC's Preliminary Overview of the Caribbean 2008-2009 Country brief, the slowdown of the United States’ economy has triggered a marked deceleration in the growth rate of the Bahamian economy, to 1.5% relative to 2.8% in 2007. Tourism demand and construction have softened and FDI inflows have also lessened. In the wake of weakened private sector activity, the government engaged in some fiscal stimulus to maintain growth and employment; thus the fiscal stance has deteriorated somewhat during the early part of fiscal year 2008/09. Growth for 2009 is forecast at 0.5%, however, the outcome will be strongly contingent on the length and depth of the slowdown and financial crisis in the United States, the Bahamas’ major market.

Tourism

Activity has slowed in the tourism and financial services, the drivers of the economy, especially in the latter part of the year. Real growth of 1.5% is expected relative to 2.8% in 2007. During the first seven months of 2008, total visitor arrivals declined by 3.2%, as a 5.9% fall in sea visitors offset the 2.2% increase in air visitors. Moreover, the prospect for the full year is somewhat more depressed, as travel demand continues to soften in the wake of more intense fallout from the financial crisis in the United States market, which generates about 87% of tourists
to the Bahamas. This is particularly worrisome as tourism accounts for around 50% of GDP and employs about 60% of the labour force. In 2009, GDP growth is expected to slow to 0.5% as weakened global demand affects domestic activity.

• Economic Survey of the Caribbean 2007-2008

The survey provides an overview of the economic performance of countries of the Caribbean Development and Cooperation Committee (CDCC) for the year 2007 and their outlook for 2008. The last chapter presents country briefs with the main macroeconomic developments in 2007 and the outlook for 2008.

Despite sound macroeconomic management over the last years, economic growth in the Bahamas slowed in 2007 but nevertheless remained solid. Real output grew by 2.8%, compared to a 4.6% increase in 200644. A slowing in construction activity and reduced growth in credit expansion partly offset the impetus from improved tourism. Reflecting higher costs of furniture and household goods and the strong pass-through of international fuel and food prices, December-on-December inflation picked up to 2.9%, remaining at a moderate level but surpassing the 2.3% registered in 2006.
Government finances weakened during fiscal year 2006/07, as the overall fiscal deficit doubled to 1.6% of GDP. Fiscal performance was undermined by the slowdown in economic activity, which led to sluggish growth in revenue, which was outpaced by the rise in spending.

• Economic Activity for 2008

According to the Bahamas Quarterly Economic Review, March 2009, preliminary data suggests that domestic economic activity contracted during the first quarter of 2009. Conditions were characterized by a sharp decline in tourism output, softer consumer demand and reduced stimulus to construction activity from foreign investments. However, as global price pressures further moderated, inflation trended lower, continuing to ebb from the peak levels attained during the middle of 2008.

Fiscal operations remained adversely impacted by the weakness in the economy, with the comparative deficit widened during the third quarter of FY2008/09, as a result of a reduction in revenues and increased outlays. On the monetary front, the seasonal rebuilding of bank liquidity occurred within a more subdued private sector credit environment but with narrowed gains in the deposit base.

Meanwhile, the reduction in domestic demand and lower oil prices contributed to a significant decline in the trade deficit and a reversal in the estimated current account balance to a modest surplus. However, the capital account surplus contracted, based on the slowdown in private foreign investment inflows.

• Report on the Financial Sector

entitled: GROSS ECONOMIC CONTRIBUTION OF THE FINANCIAL SECTOR IN THE BAHAMAS (2008)

The report summarizes the results of the Central Bank’s 2008 survey on the gross economic contribution of
the financial sector to The Bahamas. Data on the banking sector’s involvement in the economy have been collected
from as early as 1977. Over the past eight years, the Bank has sought to expand its coverage to capture the
contribution of other financial sector entities, including insurance companies, credit unions, mutual fund administrators and financial and corporate services providers. Bahamas Quarterly Economic Review, pg. 37

• Inflation

The rate of inflation softened to 1.6% in 2006 compared to 2.1% in 2005, however unemployment remained stabled at 10.6%.[Source:The World Factbook