Government will have to reconsider its deficit targets all depending on how much of an impact the outbreak of COVID-19 has on the Bahamian economy, Financial Secretary Marlon Johnson said yesterday.
Johnson said looking ahead, the new budget cycle which the Ministry of Finance was in the process of constructing was based on economic assumptions that no longer exist.
“This whole COVID-19 brings a whole new ball game to this. And even when the crisis subsides, our expectation is that the recovery will still take some time because people still have to get comfortable enough to travel, they have to feel comfortable that this jurisdiction is safe with safe passage. So, some of our economic projections for next year will likely have to be muted,” he told Guardian Business yesterday.
“We know there may be higher unemployment and the likes, so the government will have to figure out what are the kinds of things we have to support…and try to spur some economic activity. And the net result of that is that we may have to revisit some of our deficit targets.”
But, that isn’t going to be the first thing government will do, Johnson said. He said the idea is to try to keep the fiscal discipline and then to reprioritize expenditure.
“First of all, we look at what we won’t touch and what we won’t touch, if it could be avoided, is anything related to the recovery of Abaco and Grand Bahama,” he said.
“We still have to provide funding for rebuilding plans, the water plans, all of the clean up and anything that will support the reconstruction. So that’s a priority there. The healthcare spending, we can’t obviously touch that, and we may even need to ramp that up depending on what’s happening here.
“So, the healthcare and support you can’t touch that, social welfare and spending you can’t touch that, and infrastructure. So, what we will try to do is reorganize the infrastructure spend to create more domestic economic activity. So, what then gets touched? There are new projects that were planned to come on stream and I spoke to my permanent secretary and we’ve pushed the pause button on new projects except for those that can generate some employment. And there is discretion.”
During his address in Parliament Wednesday on government’s fiscal response to the COVID-19 outbreak, Deputy Prime Minister and Minister of Finance Peter Turnquest said the Ministry of Works will reprioritize capital projects to increase the number of quickly deployable small-scale capital works to boost small business activity.
Johnson said even this is a challenge for government.
“Every time you look down the list, especially in infrastructure, it’s hard to defer a lot of these things,” he said.
“And part of the rebuilding and rebounding strategy will be looking at things and how we can ramp up infrastructure to try to absorb some of the lost capacity of the economy.”