By Vernon C. Jones, Guardian Staff>>>
Nassau, Bahamas:
Vernon@nasguard.com

Wendy Craigg

Governor of the Central Bank of The Bahamas:

There is convincing evidence in support of the Bahamian economy being on course to achieve the 4.0 per cent growth rate forecast by the IMF in its most recent World Economic Outlook.

We have experienced an elevated level of private sector demand, which has provided opportunities for a 2.6 per cent reduction in the unemployment rate; and, despite the oil price hikes, growth is being achieved in a low inflationary environment. The 12 month to November change in the CPI moderated to 1.74 per cent from 2.01 per cent last year.

For the Central Bank, the evolution of credit is always closely monitored given the implication for external reserves. Since the removal of the credit restrictions in August 2004, we have observed a strongly expansionary trend in credit—with growth of 11.8 per cent for the first ten months of 2006 building upon the 9.1 per cent for 2005. Growth in mortgages, which helped to sustain employment in the construction sector, has been maintained around 14.4per cent and consumers have taken on additional debt of around $193.4 million or an increase of 11.7per cent, which we do not view as a sustainable position. There is a strong appetite in The Bahamas for consumer credit, and clearly a need to encourage individuals to save more towards their purchases. Banks have been asked to play a more active role in this effort, particularly by way of their promotional initiatives.

As a result of the strong credit growth, the higher oil payments and several extraordinary outflows, much of the liquidity overhang accumulated through to 2005 and the first half of 2006 has been absorbed, and this reduction has been reflected in a lower level of external reserves.

Going into 2007, we could expect to see some slowing in credit growth given the reduced level of system liquidity. The Central Bank's main concern will be to ensure the orderly growth in credit—that the rate of credit expansion does not exert undue pressure on external reserves. However, we expect liquidity conditions to improve somewhat as we move into the traditional peak of the tourism season, and these flows are complemented in a more substantial way by inflows linked to the start up of some of the foreign investment projects in the pipeline.

James Smith

Minister of State for Finance:

The outlook for 2007 is quite good. GDP is expected to rise 4 to 5 per cent, in line with expectations of the IMF and other international organizations. What we are seeing now is the challenge of how to maintain that growth. Looking at the recent past we have lost foreign reserves because of increases in oil prices, a surge in credit spending growth and large capital acquisitions by Bahamian interests (such as the FOCOL and CARIBCO deals) that further exacerbated depletion of the foreign reserves.

What we need to maintain growth and build the reserves are the inflows from the (resort) anchor projects.

Those are really the challenges over the next 12 months.

PAUL McWEENEY

Managing Director of Bank of The Bahamas:

I'm looking forward to a positive year.

I'm optimistic that in the first quarter we should see some signs of significant improvement in liquidity. Obviously that really is one of the anchors of having a solid financial fiscal period. I feel that the GDP (Gross Domestic Product) growth for the country may be between three and four per cent.

Because it's an election year in any event, there tends to be more economic activity taking place in the short term. I'm looking forward to a pretty strong year, especially if they can get the Royal Oasis Resort transaction in Grand Bahama completed. Obviously that would do a great deal to boost the economy of Grand Bahama which is lagging. This is probably the one island with financial indicators that many weigh down the overall progress of the country. But the government is putting a lot of effort into making that transaction a reality over there, which could decrease unemployment figures.

Vincent Peet

Minister of Financial Services and Investments:

I think 2007 should be a very prosperous year for the Bahamian economy building on the strength of 2006. The fact is that investment is at an all-time high with very strong projections for 2007; the fact is we have before our ministry applications for investment amounting to over $20 billion and that the start-ups, and others in various stages of development, total over $9 billion. Those are basically the facts.

For 2007 the government's major thrust will be to continue growing Bahamian domestic investment so Bahamians can benefit more directly from foreign investment. To that end, there will be an aggressive campaign (encouraging) investment opportunities between Bahamians and foreign investors, led by the Domestic Investment Board answering to our ministry, Financial Services. The challenge is how do we find qualified Bahamians to meet the demand for skilled employees. Employee training programs set up by developers should help create qualified employees.

Bahamians must own their own piece of the rock and the government will facilitate that.

Montgomery Braithwaite

President

ColinaImperial Insurance:

There are a lot of development projects on the table or in the pipeline. No one knows for sure when exactly the projects will come to fruition and that will decide how 2007 shapes up. We at ColinaImperial will be curious to see when they will materialize. They will create new jobs and we look forward to servicing their insurance needs. We are always happy to see growth in employment.

If NIH is not introduced in a gradual way then I don't think the insurance industry will be able to adjust.

Jan Mezulanik

Chairman - Association of International Banks and Trusts:

We need not be reminded that the Wealth Management industry is global and highly competitive. With 2007 being an election year in the Bahamas, we trust that the government will continue to maintain focus on the development of our industry and business at hand.

Responsiveness to addressing the perception of the jurisdiction, as identified in the Bahamas Branding Survey, is fundamental and we must move towards proactively identifying the business of the future and a strategy for sustained growth.

JOHN CHRISTIE

Vice President of H.G. Christie Ltd:

I think that the real estate business is going pretty good at the moment and I think we expect growth to continue into the new year. The international market is driving real estate, and if that continues to do well, then the local economy will continue to do well. I don't really foresee any challenges going into the new year based on the performance of the economy right now. We are also looking for a lot of new developments to come online, so we anticipate even more business for the industry next year.

TANYA WRIGHT

President of The Bahamas Chamber of Commerce:

From the point-of-view of the Chamber, we want to see a safer business environment across the board. We ended this year with a focus on crime prevention and a number of global issues such as trade.

But next year we will focus more on the micro economic business sector, which contributes some 60 per cent to GDP (Gross Domestic Product). Crime is perhaps the most significant factor impacting businesses in The Bahamas, and all aspects of crime affect how business is done.

We think that the businesses that operate in a crime sensitive environment will see more consumer confidence, which should translate into better business in 2007. Businesses that invest in security systems will get the jump on the market. But businesses that do not have a serious focus on crime deterrence may find themselves targeted. This could also affect consumers that patronize those businesses, especially those who use credit cards.

The message going into the new year is to conduct safe business. We think more businesses will take a more proactive approach to mitigating themselves from criminal activity in 2007.

PAUL MOSS

Managing Director of Dominion Management Services Ltd:

We need to have more ownership of the financial services industry by Bahamians. This is an industry that is really dominated by international players. We need to look at that.

If we look at banks in this country in particular, we see that besides Commonwealth Bank and Bank of The Bahamas, there is no other bank that is Bahamian owned. Something seems to be wrong with that. You go to any other country, and they certainly seem to have ownership of those particular types of institutions. Unless you have a strong base in banking you are not going to have any industry, and that is where I think the focus ought to be. This is not something that is high on the financial services agenda, but it should be.

We need to really find a way to make ownership and stake holder interests in this economy protected by Bahamians.

Patricia Hermanns

President of Famguard Corp:

The implementation of the (National Health Insurance Plan) will bring with it a significant change in the type of health service products offered in the industry. We will respond by providing new services or shifting existing services in order to broaden health care beyond what NIH will permit.

There are, of course, concerns about the lack of liquidity in the market and Bahamians saving for retirement and "rainy days". Pension funds will reach a (collective) $1 billion by next year. The increased role of pension products will increase income stability for retirement.

There is a need for Bahamians to start thinking about their futures, to focus on retirement and pension savings.

I'm optimist about 2007. We're looking forward to continued growth in 2007 and waiting for more information on NIH. There hasn't been enough detail yet. With that information we'll be in a better position to evaluate it.

Larry Wilson

Chief Financial Officer

RBC Royal Bank of Canada and RBC FINCO:

Basically 2006 was an exceptional year for the financial sector. We have good jumping off point for 2007. The development projects lay a good foundation for 2007 and future growth of the economy.

One concern is there is simply is no money in the system. We have a liquidity problem. With the Christmas season coming to an end and merchants hopefully now putting money back ino the system and with foreign investors hopefully bringing some money in the country, we can get that in order. Barring any natural or man-made disasters.

KEITH DAVIES

Chief Executive Officer of Bahamas International Stock Exchange (BISX):

Our outlook is positive. The formalization of the government debt market is our major focus for 2007 and the implementation of that platform would allow us to do a number of other things.

We are trying to be more innovative in the area of mutual funds. One of the things we have determined is that the funds industry needs new and innovative ideas to propel it forward. What the exchange wants to do is to provide a boost in any way we can to facilitate drawing business to boost the funds industry. In the past that has not really been an area of growth for us.

We also expect to have a number of new listings. We are focusing on three different [traunches] relative to the development of the international trading platform. We are positive that one of those three will pay dividends for us in the future.

The overriding concern we have had has been in the area of education. For us the challenge is getting individuals to understand that investing is a component of saving. We need to become net savers instead of net spenders, and we are net spenders as a country. In order to foster the growth and development of capital markets, we need to understand that long-term investing will have a better impact. We will address that challenge moving into the new year.