Bank Boss Warns: We Must Act On Jobless
John Rolle, addressing a briefing on 2019 first half economic developments, warned that this nation needed to exceed its projected medium term growth rate on a sustained basis “to see a more accelerated reduction” in an unemployment rate that has remained stubbornly over ten percent for more than a decade.
“I would say that if we can get the rate comfortably and consistently above the two to three percent range, we will make more of a dent there,” he explained of the link between GDP growth and unemployment.
“One has to recognise we need to be growing the economy ahead of what’s happening with the population and the diversity of its needs. There is room, with growth rates below two percent, to see some reduction in unemployment but, to see a more accelerated reduction long-term we need to aspire to higher growth rates.
“We’re within a range where I would expect the unemployment rate to trickle lower, but if we want to see it gushing in terms of getting lower we need to focus on getting the growth rates up…. We need higher growth than the average projected for us to see unemployment move down at a faster rate.”
Mr Rolle acknowledged that jobs were being created, but The Bahamas’ story in recent years has been that the economy is not growing fast enough to both absorb existing unemployment as well as the 3,000-5,000 high school leavers that enter the workforce annually every summer seeking work.
The Central Bank governor added that The Bahamas needed to pay attention to the industries it was investing in, and seeking investment for, to ensure that skills and other factors of production were up to the task when it came to delivering the quality services and products required for economic growth.
The Bahamas’ national unemployment rate rose from 10.1 percent in November 2018 to 10.7 percent in May, and the International Monetary Fund (IMF) has already cast doubt on the country’s ability to hit the 2-3 percent GDP growth targets that Mr Rolle says it needs to target.
It shaved 30 basis points off The Bahamas’ 2019 GDP growth forecast in its recent Article IV assessment, cutting this from the previous 2.1 percent to 1.8 percent. And, over the medium term, it is forecasting that annual Bahamian economic output will trend slightly lower at around 1.5 percent.
The IMF’s growth revision is likely to have been prompted, at least in part, by the Department of Statistics’ release of The Bahamas’ annual GDP data in May, which found that real growth in 2018 had come in at 1.6 percent.
Although those findings, which were released after the Fund’s April statement, represented the first substantial economic expansion for five years they were still well short of the 2.3 percent real growth that had been projected for 2018 by both the IMF and the Government.
Mr Rolle, meanwhile, said the tourism industry’s recent Baha Mar-fuelled growth was expected to moderate in 2020, although fears that the Cable Beach-based resort would “split” the high-end visitor market with its mega destination rival, Atlantis, had proven unfounded.
With the hotel sector a more dominant factor than the vacation rental market in tourism’s growth, Mr Rolle said: “The industry absorbed the room capacity boost from Baha Mar, both increasing the average room occupancy rates and securing higher average daily room rates.
“The 2020 outlook is for further growth in tourism, but at a slower pace, since hotel room inventories will not increase by the same magnitudes as in the past 12 months.”
The Central Bank governor added that The Bahamas remains well-placed to add to its hotel room inventory, albeit not to the same extent as Baha Mar’s net extra 2,300 rooms, but warned that service quality must keep pace with any expansion.
“The Bahamas still has capacity medium to longer-term to get gains from tourism,” Mr Rolle said. “What we’re experiencing is a big jump up in tourism because we have a lot more hotel rooms, and we’ve sold those. We’ve sold a greater percentage of the rooms we have in inventory, so occupancy rates are higher overall.
“If we’re not adding more hotel rooms the medium to long-term growth mechanism is get your customers to spend more money in the country. The industry has some growth capacity, but manageable growth in capacity, as you have to maintain a certain quality standard. You have to train people to a certain standard.
“If the pace of growth in rooms is faster than the population, the people are able to deliver service, it will not work in terms of being sustainable. The Bahamas has to manage that but recognise there is scope to increase the returns from tourism by finding more activities in country for people to participate in.”
Mr Rolle pointed to the focus on developing heritage and cultural tourism, as data from the Bahamas Hotel and Tourism Association (BHTA) and Ministry of Tourism again revealed “double digit” increases for May and the first five months of 2019.
“Room revenue firmed by 26 percent, as the average daily room rate (ADR) rose by 6.6 percent year-on-year to $237.93 and the average occupancy rate increased by 9.1 percentage points to 72.6 percent, while the number of room nights sold advanced by 18 percent,” the Central Bank said of the resort industry’s May performance.
“Similar developments were noted over the January to May period, with the number of room nights sold firming by 21 percent, contributing to the 11.3 percentage point strengthening in the average occupancy rate to 76.8 percent. In addition, amid a 9.9 percent expansion in the ADR to $288.08, total room revenue advanced by 33 percent.”
As for vacation rentals, the Central Bank added: “The latest data from AirDNA showed that part of the improvement in stopover arrivals was attributed to the sustained growth in the short-term rental market.
“Total room nights sold increased by 33.4 percent in June over the same period of 2018, with bookings for both ‘hotel comparable’ and ‘entire place’ listings advancing during the month. Moreover, an analysis of the major markets revealed gains in bookings for the key markets of Exuma, New Providence, Abaco, and Grand Bahama of over 30 percent each.
“In contrast, the ADR for both the ‘hotel comparable’ and ‘entire place’ segments contracted by 17.2 percent to $147.29 and by 7.9 percent to $402.32, respectively, as broad-based declines were reported across all major destinations, due in part to the addition of lower priced listings.”
When asked whether this tourism growth was translating into real economic benefits for ordinary Bahamians and their families, amid suggestions that it was not being felt more broadly, Mr Rolle pointed to the number of “yellow plate” vehicles on the streets of New Providence.
Pointing to the numerous vacation renters and visiting boaters buying supplies in Bahamian stores, he added: “We know individuals coming here are eating and moving around. If some of them are not seeing it, it’s not that people are not here and not spending money.”
Mr Rolle reiterated that The Bahamas may have to look at developing new activities to ensure tourism spending was more widely distributed.
By Neil Hartnell
The Tribune
Published July 29, 2019
