Bahamas Could Be Facing A Recession, Economic Review Warns

by Amanda Banks, Tax-News.com, London

01 November 2002

The Fidelity Forum, a regular economic review conducted by Caribbean financial services conglomerate, the Fidelity Group has warned that the Bahamas may be heading towards a recession if steps are not taken to avert the crisis.

Speaking to the Nassau Guardian regarding the review, which revealed that the Bahamian economy grew by about 1% in 2001, compared with 5.9% in 1999, and 4.5% in 2000, Fidelity's executive director, Alfred Stewart announced that:

'We need to act now in order to head off a deep recession. This is particularly important in light of an impending new Gulf war. Doing nothing or business as usual is not an option.'

According to the Nassau Guardian: 'In order to pull the Bahamas out of this state, Mr Stewart suggested that the prime [interest] rate be dropped by 2%...government capital project spending [be increased], and lower tariffs on construction materials [be imposed].'

Questioned on the causes of the jurisdiction's economic woes, Mr Stewart explained: 'The reasons are clear. Hotel revenues are down and so are employee earnings. There has been a sharp decline in foreign direct investment. Bahamians are consuming less, resulting in lower imports and lower merchants sales. Lower imports have reduced government revenue from import stamp duties and the government's fiscal deficit is approaching $200 million.'

He went on to add that the current uncertainty in the global equity markets has led to a drop in assets under management, which in turn has forced players in the jurisdiction's offshore sector to attempt to reduce their overheads, and warned that the Bahamian government needs to take affirmative action to address the economic slowdown, rather than just 'borrowing to bridge the fiscal deficit.'

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