Unemployment across the island nation is on the rise, hitting a 10-year high, while tourist arrivals are down and business confidence is sagging. Although there are some signs that the global economy is slowly moving towards modest recovery, most indications are that the Bahamas will have to wait until 2010 before grass roots start sprouting.
In its latest monthly economic and financial developments report, issued in mid-August, the Bahamas Central Bank warned that the economy was not projected to return to long-term growth until late 2010.
Citing the effects of the global economic downturn, which harmed the tourism sector and reduced foreign investments, the Central Bank said that while the government's increased spending on infrastructure would help mitigate some of the impact of the recession, the stimulus programme and lower revenues would also mean debt and GDP were expected to remain elevated in the near to medium term.
More optimistic were the bank's findings that fiscal liquidity levels and external reserves would remain at "comfortable levels" over the remainder of the year, while, with the exception of the tourism sector, there would be a moderating of the levels of employers shedding jobs and a tempering in the pace of economic decline.
Though the pace of the downturn may be slowing and the worst may be over for the global economy, the minister of state for finance, Zhivargo Laing, believes that the Bahamas still has a long way to go before its own recovery will fully kick in.
"We have very difficult monetary and fiscal issues to deal with, and we have to be sober about dealing with them," he said in an interview with the Nassau Guardian on August 23. "The global recovery is not something that is predictable and so for the moment the Bahamas has to take into account its own realities and know that the economic situation remains challenging."
Among the challenges is the rising level of unemployment. Department of Statistics data released in mid-August showed that 14.2% of the workforce was now jobless, up from 8.7% a year ago.
Much of this increase can be attributed to the drop in activity in the tourism sector, one of the cornerstones of the Bahamas economy. According to the results of a survey conducted by the Bahamas Hotel Association (BHA), 90% of hotels that took part in the study recorded a fall in both sales and occupancy rates in the first half of the year.
The BHA's Mid-Year Economic Review and Tourism Outlook Survey, released in mid-August, showed that 77% of hoteliers also anticipated lower revenue levels for the second half of the year. However, there was more optimism regarding 2010, with 53% of respondents saying the outlook was fair, along with 17% who viewed the prospects for the coming year as positive, while 30% said the outlook was negative.
Robert Sands, the president of the BHA, said the sector will continue to feel the effects of the economic crisis until consumer confidence in the Bahamas main tourism markets recovers and the recession ends.
"The combination of lower occupancy rates and lower room rates is creating a very difficult situation for many hotels," Sands told local media. "While there is some improvement in the outlook for 2010, we anticipate we will continue to be vulnerable."
Confidence levels at home are also well down, with the latest Central Bank business sentiment survey indicating almost two-thirds of private sector firms are expecting a fall in profits for the second half of 2009, while more than 65% had reported a worsening of operating conditions within the general business environment during the first six months of the year.
The report found a majority of companies had reduced staff numbers in the period of January to June, with 80% saying they would either not be hiring new employees or would make further retrenchments in the coming six months.
One of the few positives that could be taken from the Central Bank's report was that most of those surveyed believed that the pace at which the economy was declining would ease over the rest of the year.
While a slowing of the rate of decline is good news, it is not a recovery. For that, the Bahamas will have to wait until at least next year, when the global economy starts to strengthen, investments start to flow and tourists begin to think of sun and sand.
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