The International Monetary Fund’s (IMF) predicted real gross domestic product (GDP) growth for the Bahamian economy for 2018 softened slightly from its May prediction of 2.5 percent to 2.3 percent, a press release from its latest staff mission to The Bahamas revealed.
The IMF’s growth prediction for 2019 softened as well from its May projection, with its 2.25 percent growth prediction falling to 2.1 percent.
Nevertheless, these numbers are an improvement from the Bahamian economy’s run of declines in growth under the previous administration.
The IMF’s press release credits the country’s recent tourism boom as a big reason for the spike in growth. The tourism growth has been credited to the spike in room inventory due to the opening of Baha Mar, increases in airlift, and improvements to the U.S. economy, according to the IMF and The Central Bank of The Bahamas (CBOB).
“Growth is driven by an increase in tourist arrivals, paired with an expansion of hotel room and airlift capacity, and against the backdrop of the continued expansion of the U.S. economy,” the release states.
“This calls for maintaining strong fiscal and financial policies to bolster the Bahamian economy’s resilience and build buffers should external conditions become less favorable, and for advancing reforms to achieve more inclusive growth over the medium term.”
The IMF lauded the government’s fiscal responsibility law, explaining that it “will support the government’s efforts to secure fiscal sustainability and put debt on a downward path”.
The press release also points out that the government has improved the fiscal deficit from 5.5 percent of GDP in 2017 to an estimated 3.3 percent this year.
“In the budget for fiscal year (FY) 2019 the government committed to further fiscal consolidation, targeting an overall deficit of 1.8 percent of GDP,” the release states.
“This is supported by various revenue mobilization measures. As noted during the 2018 Article IV consultation, fiscal consolidation should also include decisive measures to contain expenditure growth in the short and medium term. The team welcomed the government’s transparent recognition of accumulated arrears and the budgetary provisions to clearing them, as well as the plans to put in place robust expenditure control systems.”
The IMF’s visit on December 3-7, 2018, to review The Bahamas’ economic developments and prepare for the 2019 Article IV consultation, slated to be released April 2019, was led by Fabian Bornhorst.
He and his team met with Deputy Prime Minister and Minister of Finance Peter Turnquest, Governor of the CBOB John Rolle, and other senior government officials and representatives of the private sector.