Bahamas 'In Good Shape', IMF Concludes

by Amanda Banks, Tax-News.com, London

11 August 2011

The International Monetary Fund has said the Bahamas' economy is in good shape following an assessment undertaken during July.

On conclusion of the mission, Gene Leon, Head of the IMF mission to the Bahamas, issued the following statement at the end of the visit:

“Economic recovery in the Bahamas is gaining strength. Real output grew by about 1% in 2010 and is expected to grow by 2% in 2011."

“The fiscal deficit in FY2010/11 widened to about 4.75% of Gross Domestic Product (GDP). Total revenues [however] increased, aided by higher-than-average stamp duties, but expenditures increased more, owing to higher spending on goods and services. Higher spending on new government initiatives are expected to widen the central government deficit to about 5.25% of GDP and raise central government debt to over 50% of GDP in FY2011/12.”

“Additional risks to the fiscal outlook arise from the continued weak performance of the non-financial public enterprises. Despite these prospects, the banking system is expected to remain sound.”

On the territory's international financial centre, the IMF said that the severe economic contraction during 2008-09 and high unemployment resulted in an increase in the ratio of non-performing loans, but stress tests have shown banks "remained adequately capitalized”.

“Global developments, including high oil prices, pose risks to the outlook. The mission is confident that the determined pursuit of fiscal consolidation and an enabling investment climate will improve the macroeconomic environment and support sustained economic growth,” the Fund concluded.

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