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Bahamas Economic Outlook Assessed
Related to country: Bahamas

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Economic Outlook Assessed:
By Tameka Lundy -
Nassau, Bahamas:



Prime Minister Hubert Ingraham sees a resilience that spurs job-creating growth. The World Bank predicts a global slowdown. The Central Bank of The Bahamas forecasts a relatively positive outcome.

The dawn of a new year has brought with it various expectations and predictions about how the economy will perform in 2008 and to what extent outside factors will impact that performance.

Despite the upheaval in the US housing market, dragging momentum in the US economy and continued high and increasing oil prices, the Governor of the Central Bank Wendy Craigg offered a glimmer of hope in her economic outlook.

"I do believe that the prospect for the Bahamian economy for 2008 is, on balance, positive and this is because of the numerous foreign investment projects that are slated to commence during the course of this year," she said.

However, over the course of 2007, there were undeniably some developments that caused ripples of anxiety about the country’s economic health. Following the sudden and sharp drop in market valuations of U.S. mortgage-backed securities in mid-2007, global markets have entered a phase of heightened uncertainty. This has been reflected in increased volatility in equity markets, commodity prices, and exchange rates.

But according to a report from the World Bank on the prospects for developing countries like The Bahamas, notwithstanding the increased volatility, the impact on developing countries has been relatively minor to date.

"So far the economic consensus is that the global economy will slow and we will be faced with increasing price pressures," added Governor Craigg in a taped address to a wide cross section of business professionals eager to piece together an outlook for the Bahamian economy.

"As you can see in the last few days the price of oil has hit $100 per barrel and it’s expected that oil prices will remain high throughout 2008 and so this is something that the Bahamian economy will be challenged with moving forward."

The price of oil is an issue that is never far away from consideration when discussions revolve around the local and global economy. It was a prime issue referred to by speakers at the opening of a high profile regional tourism event – the Caribbean Marketplace at the Atlantis Resort.

Prime Minister Hubert Ingraham has an answer for why the Bahamian economy’s growth slowed down last year.

He cited a slowing US economy; a softening tourism performance; tapering-off in investment inflows as major projects such as Kerzner International’s Third Phase came to an end; and a decrease in an unsustainable level of growth in domestic bank credit.

But towards the end of 2007, things changed, he said. Mr. Ingraham reported in his address to the nation on Sunday night that there were signs of a moderate rate of expansion toward the end of the year and liquidity levels in our banking system were $117 million, significantly higher than the $39 million at year-end 2006.

"Present indications are that tourism, with appropriate interventions from us, will achieve moderate growth," he said.

"In these circumstances, there will likely be sufficient resilience in the Bahamian economy to fuel significant job-creating growth during 2008. This will be due primarily to a number of foreign investment projects and substantial public infrastructural work which we shall be undertaking."

In another development of note, the International Monetary Fund indicated that it had adjusted downward its global growth estimates based on the findings of new purchasing power parity estimates. The IMF has now predicted a half of a percentage point lower growth for each year during the period 2002 – 2007.

For instance, the IMF now predicts that the global growth for 2007 will amount to 4.7 percent instead of the 5.2 percent it had forecast in the October 2007 World Economic Outlook.

The IMF pays particular attention to purchasing power parity figures as the basis for calculating the relative size of economies.

Using China and India as examples, Masood Ahmed, director of External Relations Department at the IMF, explained the effect of the new figures on the rest of the world’s growth.

"…the total number for growth has also gone down because the faster growing economies have actually turned out to be a smaller share of the world than was assumed under the previous purchasing power parity numbers than has been used," he said.

The Bahamas government has reported that the growth rate for the Bahamian economy slowed in 2007 to 3.1 percent, down from 3.4 percent in 2006.

In its outlook for 2008, the World Bank indicated in a new report that GDP growth among low and middle-income economies eased just 0.1 percentage point in 2007 from the strong 7.5 percent recorded in 2006.

"Despite weaker U.S. import growth, continued robust spending by oil-exporting countries and vibrant expansions in China and India are projected to keep developing-country growth strong at 7 percent or more in 2008 and 2009," noted the report.

"Over the longer term, the resilience of developing countries’ improved fundamentals will be tested."

15 January 2007

January 15, 2008 | 5:15 PM Comments  0 comments

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