Governor of the Central Bank of the Bahamas, Julian Francis, has predicted a rosy year for the jurisdiction's economy. In an interview with local newspaper the Bahama Journal, Mr Francis said that the economy will remain in healthy condition throughout 2001. The Central Bank has reported that the growth of the Bahamian economy was approximately 4 per cent last year. The only concern for the Bahamas is that the slowdown of the US economy will impact on the country's vast tourism industry, a staple of the economy.
Mr Francis told the Bahama Journal: 'The economy is still doing quite well. In fact, it is doing very well. We anticipate that if the American economy does experience some reduction in its rate of growth from three and a half percent to about two and a half, we expect that there is likely to be some response to the level of tourism activity. But it is not likely to be felt immediately and it is not likely to be very severe if the reduction in growth in the American economy is contained at two and a half percent or two and three quarters percent'.
Mr Francis downplayed the impact of the OECD's harmful tax initiative and the FATF's blacklisting of countries deemed to have inadequate counter-money laundering controls. He said the government had acted quickly to allay fears that the initiatives would have a seriously negative effect on the Bahamian economy: 'The banking community has been reassured by the very strong and very rapid response by the government and the evident progress that has been made in dealing with the issues relating to the blacklisting'.
What Mr Francis was referring to was the raft of financial legislation which was enacted at the end of December and designed to bring the Bahamas' financial services sector into line with international best practice. As a result, Mr Francis said he was satisfied that the jurisdiction was well on its way to 'arriving at a workable arrangement with the OECD.' He anticipates that the Bahamas could be in the clear by June this year.
Mr Francis stated: 'The OECD initiative does not appear at this stage to be as aggressive as it started. While there is still some uncertainty and some question mark as to when one can expect a formal conclusion to all of this, by and large, I think if you were to ask the average banker or professional in the financial services sector they would tell you that we appear to be today in a much better position that we thought we would be three or four months ago.'
Given that the US Federal Reserve has just cut the US interest rate by half a point to 6 per cent in a bid to revive the sagging US economy and avoid a feared recession, the Bahamas could follow suit. Whilst interest rates in the jurisdiction are not set to change in the immediate future, Mr Francis predicted: 'As we look toward the second part of the year, depending on what happens in the US, we may see a further softening of interest rates because our domestic rates do tend to respond to American rates'.
The Central Bank Governor concluded: 'I believe the Bahamas is still perched to enjoy very, very good economic growth and development. Our tourism sector has been repositioned. Our financial services sector is currently being repositioned. I really see no evidence whatsoever why we should not enjoy a good 2001'.
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