The Central Bank of The Bahamas (CBOB) advised Bahamian families yesterday to exercise financial prudence until the uncertainty of the impact of COVID-19 on the economy subsides, as it “is monitoring the coronavirus situation very closely”.
The bank stated that while The Bahamas should expect some negative economic fallout as a result of the coronavirus, it is unable to estimate the amount of economic harm the global pandemic would cause at this time.
“The advice [to] Bahamian families is that until the uncertainty subsides, they should exercise prudence in their personal financial affairs and keep a tight control on discretionary spending,” the Central Bank noted in a statement released on its website yesterday.
The bank also noted that domestic banks are mobilized to provide the forbearance and accommodation for households that may encounter interim challenges, if their earnings are disrupted due to an economic slump.
“While a strain of this nature could aggravate the debt repayment challenges, local banks remain strongly capitalized to tolerate increased stress to their credit portfolios,” the statement read.
This warning from the Central Bank comes as world markets plunged and crude prices plummeted to their lowest in years yesterday.
And while it is unable to bolster its external reserves to offset the fallout at this time, CBOB said current levels can support presumably tough economic strains.
“The Central Bank is not able to provide direct stimulus to counter the negative fallout from COVID-19, as such intervention would need to boost foreign exchange earnings capacity. Tourism, the principal foreign exchange earning sector, is exposed due to the prudent international public health safety stance around travel. The bank’s focus, however, is to ensure that the economy maintains access to foreign exchange to satisfy necessary import needs,” the bank stated.
“The external reserves will help provide this buffer, as balances are at historical levels and can withstand larger drawdowns than normal. The Central Bank’s policy responses in this and other regards will remain closely co-ordinated with the broader fiscal management strategies to preserve economic stability.”
Global travel is also being scaled back amid the worldwide outbreak of COVID-19, which is expected to impact The Bahamas’ primary revenue source from the tourism industry.
Both the U.S. state department and the Centers for Disease Control and Prevention (CDC) this weekend advised American citizens against travel by cruise ship due to concerns over the virus, in a move that has been foreshadowed by Tourism Minister Dionisio D’Aguilar to negatively impact visitor arrivals to The Bahamas.
These warnings, though harmful to the economy, would on the other hand benefit The Bahamas’ ability to contain the spread of COVID-19 throughout the country, the bank noted.
“Bahamian public health defenses will play a key role in shaping confidence around travel to The Bahamas and the path that the economy takes to recover from any setback. Given The Bahamas’ proximity to the United States, the aggressive American public health responses should provide significant benefit, both from a containment perspective and incentives to travel to destinations that are closer to the U.S. mainland,” the statement pointed out.