10% Drop In Tourism Revenue

Zhivargo Laing, minister of state for finance, told yesterday’s Bahamas Business Outlook Conference that tourism contracted despite cruise arrivals being up by 15 per cent year-over-year. However, air arrivals, the country’s “high value-added” stopover segment, contracted by 12.8 per cent to just under one million visitors.

“Developments were further complicated by the fact that the hotel sector had to enhance their incentive programmes in a bid to support operations,” Mr Laing said.

Hotels across the Bahamas lamented that Revenue Per Available Room (RevPAR) was consistently down last year as rates were reduced to attract business.

Mr Laing said the Government “did what was necessary to respond to the extraordinary circumstances” caused by the global recession, although the Bahamian economy was estimated to have contracted by 5 per cent in 2009.

He added that the Government’s stabilising social assistance programmes were “not sustainable” when viewed from the public finances’ perspective.

Zhivargo Laing said the impact of the late 2008 financial collapse could have been worse effect for the Bahamian economy had the government not quickly enacted its social programmes, capital works projects and created the national unemployment benefit.

He added that despite the Government’s efforts to minimise the inevitable job losses, the economy contracted by 5 per cent last year and unemployment was driven up to 14.2 per cent.

Without the Government’s immediate injection of capital into public works projects, he ventured that unemployment percentages could have hit the 20 per cent range. Mr Laing said the Government’s finances took a hit as a result of revenue decline and increased spending, with revenues contracting by 7 per cent in fiscal year 2008-2009 compared to fiscal year 2007-2008.

He said government expenditure also increased by 7 per cent, mainly owing to its investment in its social safety net projects.

Deficit

Mr Laing said that, consequently, the country’s deficit surged from a range between $100-$190 million, or about 1.5 to 3 per cent of the country’s Gross Domestic Product (GDP), to an estimated $361 million or 4.9 per cent of GDP in fiscal year 2008-2009.

“These have been unprecedented times for governments around the world, which have been driven to implement measures to support their economies amid the contraction in private sector activity, and they have had varying capacities to achieve this outcome,” said Mr Laing.

“Fortunately for the Bahamas, our low debt-to-GDP ratios have provided us with the fiscal space to incur additional debt in such critical circumstances.”

Internationally-recognised credit rating agency, Standard and Poor’s (S&P), recently reduced this country’s long term sovereign credit rating from an A- to a BBB+.

“I hasten to note that despite the downgrade, our debt is still investment grade. Therefore, the new rating should not significantly impact our ability to grow,” said Mr Laing.

He argued that he worst of the economic decline had passed, but said the recovery process will be challenging.

“Although global indicators have in recent months pointed to a modest recovery, the pace of growth is expected to be relatively slow compared to recoveries in past recessions, and high levels of unemployment will be the norm for some time,” said Mr Laing.

Source: The Tribune