Business

IMF: COVID’s impact will likely exacerbate Bahamas’ record of low growth

Fund also cites impact of slow structural reform, slow implementation of alternative energy initiatives

The Bahamas will continue to face low growth scenarios in the coming years as a result of the impact of the COVID-19 pandemic, with the International Monetary Fund (IMF) projecting medium-term growth to be 1.5 percent given the country’s slow structural reform implementation and slow implementation of alternative energy initiatives.

The IMF made the projection in its 2022 Article IV consultation concluding statement, released yesterday.

The IMF explained that the pandemic will likely “exacerbate” this country’s record of low growth.

“Education gaps were large even before the pandemic and likely have worsened, given the varied quality of remote learning,” the IMF said.

“Private investment and employment will take time to recover. Additionally, the economy will have to contend with lasting effects of the pandemic on travel preferences, technological shifts, and climate change.

“Without decisive reforms to raise productivity and incentivize private investment, the secular divergence that The Bahamas has seen in GDP per capita vis-à-vis the US is expected to persist.”

The IMF acknowledged that the country has seen a tourism-led rebound since the country reopened, with the economy expanding “by almost 14 percent in 2021, as net tourism receipts tripled relative to 2020” during the height of the pandemic.

The IMF report explained that a strong recovery will continue into the end of this year, though it projects that the country will not return to pre-pandemic visitor numbers until 2024.

Other authorities predict pre-pandemic numbers could return by early 2023.

“The pandemic has deepened medium-term growth challenges and public finances have deteriorated,” the report said.

“The young experienced significant learning losses, and employment will take time to recover. Additionally, there may be lasting effects of the pandemic on travel, shifts in technology and climate risks.”

The IMF report adds that the downside risks to The Bahamas’ growth remain elevated when compared to upside projections.

The report explained that those risks include new COVID-19 variants; new pressures on global food and oil prices due to the war in Ukraine; a sharp rise in global risk premiums that could further strain public and private balance sheets; and natural disasters related to climate change.

“In the event of downside risks materializing, the government will need to find ways to provide additional fiscal support – including well-targeted social assistance – which may prove challenging given the significantly diminished fiscal space and potential inability to tap new sources of financing,” the IMF said.

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Chester Robards

Chester Robards rejoined The Nassau Guardian in November 2017 as a senior business reporter. He has covered myriad topics and events for The Nassau Guardian. Education: Florida International University, BS in Journalism

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