IMF: Bahamas growth rate cut due to ‘weaker U.S. recovery’
Guardian Business Editor
Published: Oct 16, 2013
The International Monetary Fund (IMF) mission chief for The Bahamas has confirmed that its lowering of the growth outlook for The Bahamas last week was based on shifts in the external, global economy and specifically the United States.
Mbuyamu Matungulu, in an emailed response to Guardian Business about the factors that informed the international financial institution’s decision to reduce the gross domestic product (GDP) growth rate projections for The Bahamas for 2013 and 2014, pointed to the lowering of the outlook for the U.S. as pivotal to the adjustment of the Bahamian projections.
“The U.S. economy is projected to grow by 1.6 percent in 2013, one full percentage point below the projection for 2013 that was available in April 2012.
“The weaker U.S. recovery is negatively affecting tourism and the wider Bahamian economy, as the United States accounts for 80 percent of tourist arrivals in the country.
“In the first half of 2013 the number of tourist visitors to The Bahamas increased by 1.4 percent only, down from 9.6 percent in the same period last year.
“IMF staff has revised its 2013 and 2014 growth projections for The Bahamas to notably reflect the less favorable tourism performance and outlook,” said Matungulu.
Last week, the IMF released its World Economic Outlook (WEO) report for 2013. In it, it lowered The Bahamas’ projected GDP growth for 2013 from 2.7 percent to a more conservative 1.9 percent.
It also reduced growth expectations for 2014 from 2.5 to 2.1 percent for The Bahamas.
The shift in expectations from the influential Washington, D.C.-based multilateral financial institution elicited questions as to whether the less positive growth outlook was connected just to external economic events or could be traced to any extent to domestic policy decisions, such as plans to implement value added tax (VAT) in 2014, or tax increases that businesses have suggested are burdening some sectors in the Bahamian economy.
The WEO provided a revised global growth figure of 2.9 percent for this year, a cut of 0.3 percent from July's estimate. In 2014 it expects global growth of 3.6 percent, down 0.2 percent.
Bahamian commentators told Guardian Business last week that they were not surprised by the cut in expectations for the Bahamian economy, suggesting the revised numbers are “more appropriate” and “reasonable” in light of conditions.
The moderation in the U.S. and global outlook comes as the world waits to see if the U.S. government will reach a deal to avoid a default on its debt, an outcome which many are warning would throw financial markets into chaos and could lead to another global recession.