A new World Bank report explains that countries in the Latin America and Caribbean (LAC) region are experiencing a recovery, though “without taking off”, with the bank holding to a two percent gross domestic product (GDP) growth for The Bahamas in 2021 and growth of eight percent in 2022.
The World Bank’s data shows The Bahamas’ GDP growth slowing to four percent by 2023.
The bank explained that many Caribbean countries are in the low-end of the recovery slope due to their heavy reliance on the tourism sector for revenue inflows and given that the COVID-19 pandemic greatly debilitated the tourism industry on a global scale.
“Caribbean economies populate the bottom end of the growth distribution, as they rely heavily on tourism flows that are recovering slowly,” the report said.
“St. Vincent and the Grenadines, Suriname and Haiti, still recovering either from disasters or political upheaval, are expected to lose 6.1, 3.5, and 0.8 percent of GDP, respectively. The Bahamas, Barbados, Jamaica, Grenada and St. Lucia are expected to grow between 2 and 3.5 percent in 2021.”
The report highlights resolving insolvency as an important part of countries’ recovery process and puts The Bahamas’ ease of doing business score above the regional average when it comes to this matter.
“Several countries find themselves with over 40 percent of firms reporting a likelihood of arrears in the six months after January 2021 and two are over 60 percent,” the report states.
“The concern is threefold. First, these firms will either exit from COVID-19 with high levels of debt, impeding capital accumulation and growth, or they are de facto bankrupt and continue as zombie firms.
“Developing more streamlined mechanisms than the often clumsy bankruptcy procedures of the region, particularly for small and medium-sized enterprises (SMEs), is an urgent priority.”
“To mitigate the devastating effects of the pandemic on economic activity, the Latin American and Caribbean countries applied strong counter-cyclical fiscal policies in 2020,” the report states.
“Stimulus packages ranged in size from relatively small, less than 2 percent of GDP in Mexico, to very large, more than 10 percent of GDP in Brazil.”
In the 2020/2021 fiscal budget the government undertook the most borrowing the country has ever seen – $1.4 billion – in order to prop the country up in the wake of the COVID-19 pandemic.
The report adds that many countries in the region have faced credit rating downgrades, with The Bahamas being no exception, having been downgraded only three weeks ago.