Economy shrinks 14.5 percent

Debt-to-GDP ratio closer to 100 percent

The economy contracted by 14.5 percent in real prices — 24.7 percent in nominal terms – in 2020, according to the Department of Statistics’ Advanced Estimates for Gross Domestic Product 2020.

The new data showed that the total value of goods and services produced in the Bahamian economy was estimated at $9.908 billion in current prices, and at $9.665 billion in real prices at the end of December 2020, pushing the country’s debt-to-GDP (gross domestic product) level closer to 100 percent as the national debt stood at $9.8 billion.

Speaking to the sharp economic contraction against the high debt levels, Acting Financial Secretary Marlon Johnson said the positive trends in the economy since the start of 2021 would have again widened the gap in the debt to GDP ratio.

“It’s a transient position,” Johnson said.

“That was at the end of 2020. I suspect that, again, just given what we would have seen in recovery from December to now, that our GDP would have reinflated, so that the ratio certainly wouldn’t be near 100 percent now because our GDP five months into the new calendar year, the denominator – the actual GDP number – would be in a different place.

“It isn’t that our economy shrank to that size because of some structural deficiency. The economy shrank due to the effects of the pandemic. But certainly, where we are now in May is a vastly different place than we were then.”

The accommodation and food services industry was the most severely impacted, contracting by 71 percent or $820 million due to the sudden stop in tourism activity, travel restrictions and border closures because of the COVID-19 pandemic.

The transportation and storage industry contracted 70 percent or $316 million, followed by the administrative and support services industry, which saw a 43 percent decline, representing $115 million compared to 2019; and then the wholesale/retail trade, motor vehicle repairs industry, which reduced 12 percent or $176 million.

“Once we get through the next phase of recovery, we’ll have a clearer sense as to what the size of the economy truly is, not just the economy that was shut down because of the pandemic,” Johnson said.

“What is emblematic is what the policymakers and other informed observers have said that 2020 was an unprecedented economic situation that the country faced. The level of the contraction had not been seen at any point since the records have been kept.

“The other thing, that notwithstanding, the trends have since been more positive as the US becomes more vaccinated. As the local economy has started to open back up, we have began to trend back in the right direction, even though we’re still a distance away from where we were in our pre-pandemic economy. Certainly, the trends are heading us back to some measure of stability.”

Based on expenditure, there was also negative growth in GDP, according to the Department of Statistics, which highlighted notable declines in government and household spending, along with significant drops in imports and exports.

“General government consumption declined by $313 million (17 percent), associated with a drop in purchases of goods and services. This was a direct result of the closure of a large percent of government offices in an effort to curb the spread of the pandemic.

“Household consumption contracted by $309 million (4 percent)—a direct impact of the increase in unemployment and reduced disposable income. Government’s increase in social assistance supplemented households’ loss of income and therefore minimized the reduction in this sector,” the department said.

“Exports of goods and services receded sharply by $1.8 billion (44 percent)—led by the downturn in tourism expenditure.

“Imports of goods and services contracted by $2.4 billion (44 percent), given the lower level of economic activity. This contributed positively to GDP, as imports are deducted from the GDP.

“Gross fixed capital formation decreased by $1.1 billion (36 percent), which was broadly based across all components—although led by the buildings and infrastructure portion, which experienced a reduction of 37 percent or $839 million.”

The prime minister and minister of finance are expected to present a more detailed analysis of the economy when the 2021/2022 budget is presented to Parliament tomorrow.

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Paige McCartney

Paige joined The Nassau Guardian in 2010 as a television news reporter and anchor. She has covered countless political and social events that have impacted the lives of Bahamians and changed the trajectory of The Bahamas. Paige started working as a business reporter in August 2016. Education: Palm Beach Atlantic University in 2006 with a BA in Radio and Television News

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