economy

PM Address Falls Flat for Bahamians

Summary:


  • Speech was uninspiring and underwhelming

  • No new ideas or information for economy

  • Government fails to articulate economic or financial services growth plan

  • Address failed to demonstrate strategy to return Bahamas to investment grade

  • Silence on WTO and OBAN deafening


In the immediate aftermath of the release of labor statistics which show that unemployment is on the rise, many Bahamians looked forward to the Prime Minister’s address to the nation. The widely publicized address was supposed to focus on the government’s plan for the economy and outline plans for its revitalization.

Regrettably, the speech fell flat as it failed to inspire hope among the Bahamian people or offer innovative ideas for the resurgence of an economy with stunted growth. The PM sought to spin the unemployment narrative by touting a reported fall in joblessness in Grand Bahama and Abaco but glossed over the approximately one percent rise in New Providence. This is despite the reported record increase in tourism numbers for 2018 and announcements of multiple foreign direct investments.

It was disappointing to watch the nation’s leader make a feeble effort at justifying his recent visit to Europe with a delegation. The PM could only report that the bilateral talks were constructive, and the objective was to ensure that the European Union (EU) understands the government efforts in meeting the EU’s demands. There was no communication of a Financial Services Growth Action Plan (FSGAP); rather, the government has maintained its reactive and myopic approach to this vital sector of our economy. The government seems to have resorted to presiding over the demise of our financial services sectors through the proverbial thousand cuts.

The Democratic National Alliance (DNA) welcomes any initiative that is aimed at improving the ease of doing business in The Bahamas. In this regard, improvements in the operations at the Department of Inland Revenue (DIR) come as a relief to businesses. We submit that while the creation of a promotional arm of the Bahamas Investment Authority (BIA) could provide some gains, there are operational inefficiencies plaguing the BIA and modernization is long overdue.

Bahamians anticipated a report on the economy that included an update on the economic impact of the austerity measures imposed via the budget of hardship for 2018/19. Unfortunately, no accountability or report on stewardship of the people’s money was provided; consequently, an opportunity to distinguish the FNM Government from its predecessor was squandered.

The PM spent a considerable portion of his address on listing several intended or proposed projects and investments. The challenge here is that we’ve seen this script before with successive administrations outlining multiple projects across our archipelago of islands with a vast amount never coming to fruition for the foreseeable future. The simple response of the Bahamian people to these grandiose announcements is that the proof is in the pudding and we will not count our proverbial eggs before they hatch.

Commentaries on the Commercial Enterprise Act (CEA) have become monotonous to the populace. We call on the government to provide the Bahamian people with a report on the economic impact of the CEA including the capital injection or inflow to date, local and permanent jobs created, work permits issued, and government revenue derived from the increase in economic activity following the enactment of the legislation.

Public utterances and lamentation on the ease of doing business in The Bahamas vis-à-vis opening of bank accounts and the blue economy by the government constitute nothing more than grandstanding. We implore the PM and his government to simply get the job done rather than communicating with his ministers and stakeholders via a national broadcast.

In his national address, the PM failed to inform the Bahamian people how he and his cabinet will position The Bahamas’ credit rating from a junk bond status to investment grade.  Further, the PM was silent on the topic of The Bahamas’ accession to the World Trade Organization (WTO) and the OBAN deal which has resurfaced in recent times. This deliberate silence was deafening and telling for a government that campaigned on transparency and accountability. Has the government concluded that the WTO and OBAN are not priority areas and will not positively impact the Bahamian economy in the manner that they’ve been touting? The nation’s leader missed a rare chance to address the concerns of the Bahamian people. While many had minimal expectations for the PM’s address to the nation, we are saddened that he proved them right and delivered yet another underwhelming speech.

Arinthia S. Komolafe, Deputy Leader

Democratic National Alliance



Unemployment Figures Reflect Government’s Dismal Performance

The recently released preliminary results of the labor survey conducted in November 2018 confirm that the government has failed to adequately incentivize the private sector and stimulate the economy to put a dent on unemployment figures within our nation. Our people are suffering under an administration that failed to prepare for governance while in opposition and assumed office without an economic growth plan.

Despite the touted boom in the tourism sector and publicized record number of arrivals in 2018, it is apparent that this has not translated into sufficient jobs for the Bahamian people during the referenced period. The true state of the economy is further worsened when the loss of high paying jobs in the financial services industry and the level of underemployment is factored into the equation.

There is no empathy for an administration that has done little to alleviate the suffering of the masses and refused to implement deliberate policies aimed at economic empowerment of our people. On the contrary, the current administration has increased the rate of taxation within a regressive tax system that burdens the less privileged and middle class. Bahamians may recall that the DNA had warned that the 60% increase in the Value Added Tax rate to 12% would impact investor and consumer confidence while threatening the job security of Bahamians.

The government of blunders has invested millions of dollars of taxpayers’ funds in a dilapidated hotel and passed a Commercial Enterprise Act without anything to show for these initiatives. It is inconceivable that the recent voluntary separation exercise at the Grand Lucayan will increase unemployment in Grand Bahama which will be reflected in the May 2019 figures unless the current trend is reversed.

At a time when economists are predicting an imminent slowdown in the global economy and a recession by 2020, the private sector will remain challenged to create enough jobs to absorb new entrants into the labor market. The International Monetary Fund’s estimation that  The Bahamas needs 5.5% economic growth to absorb all new entrants into the Bahamian workforce and to cut existing jobless rates in half will continue to be unattainable until the government develops and communicates an economic growth plan.

Political rhetoric and spinning of obvious facts are not helpful to the plight of struggling Bahamians who live the reality of an increase in the unemployment rate from 9.9% in May 2017 to 10.7% in November 2018.

Surviving under a budget of hardship and an increase in the cost of living, the increase in the unemployment rate from 10.1% to 11% on New Providence is significant seeing that the capital accounts for 70% of the employed labor force. This rise far outweighs the minimal decrease in unemployment in Grand Bahama and modest fall in Abaco.

The released statistics show that the government continues to fail the youth of our nation as unemployment within this important category stood at 23.1% in November 2018 when compared to 20.1% in May 2017. The unemployment rate among women was 11.3% when compared to 10% among men; evidence of the lack of any specific focus on economic empowerment of our people.

While we laud the spirit of entrepreneurship of our people, the 11.9% increase in self-employed persons between May 2018 and November 2018 could also be attributed to the softening of the jobs market and Bahamians resorting to starting their own businesses to make ends meet.

In total, the unemployed labor force has increased to 25,135 in November 2018 from 21,880 in May 2017 showing a further deterioration in this important statistic. This is despite an increase in the government’s recurrent expenditure from a projected $2.1B for 2017/18 to an estimated $2.6B for 2018/19 and a rise in capital expenditure from a projected $233M in 2017/18 to approximately $300M for 2018/19. It is apparent that only the government and its loyalists are feeling the policies of this administration.

We maintain that deliberate actions, steps and initiatives have to be undertaken to achieve the desired and target growth levels. This must entail a combination of fiscal, monetary and economic policies as well as social reforms. It is simply reckless and irresponsible to leave this to chance, luck or coincidence.

On behalf of the Bahamian people, we petition the government to get its act together and implement an articulated economic growth plan or vacate office. There is too much at stake and our people have been suffering for too long.

Arinthia S. Komolafe, Deputy Leader

Democratic National Alliance

Government Urged: Release Fiscal Forecast Details

  • Fiscal projections were in jeopardy before legal challenges

  • Budget impact analysis remains a secret document

  • Transparency and accountability continue to elude us

  • Details of projections should be released

  • Actions fuel suspicion that no financial modeling done prior

 

It was recently reported that the Minister of Finance believes that the legal challenges by the web shop industry will put additional pressure on the Government’s 2018/2019 fiscal projections. This is bearing in mind that the Government had supposedly anticipated an increase in revenue of between $30 million and $40 million based on changes to the taxation system for this industry.

The Minister further suggested that a cutback in the form of more austere measures may be on the horizon should the Government be unable to meet its revenue targets. This is unacceptable; the Bahamian people should not be subject to additional hardship and suffering due to the lack of proper analysis, planning and consultation prior to the implementation of new fiscal measures by the Government.

The Government has ignored repeated calls for the release of the economic impact assessment conducted to justify the significant hike in the VAT rate, other taxes and fees. Rather, the modelling and forecasts document that was referenced remains shrouded in secrecy and away from the Bahamian people. The Government has effectively chosen to ignore the people’s demand for transparency, accountability and good governance while seeking our empathy for potentially missing their revenue targets.

We note that there was significant resistance to the proposed revenue measures in the lead up to the budget debate. The duplicitous actions of the current administration in increasing the VAT rate after opposing the implementation of this tax while in opposition has been highlighted on numerous occasions. The Government was advised that an increase in the tax rate will not necessarily translate into a corresponding increase in tax revenue with potential consequences in the form of reduced consumer spending, confidence and purchasing power. The reality is that the risk of missing revenue projections was always present prior to the legal challenges referenced by the Minister.

The adhoc policy decisions on certain tax measures fuel the suspicion that no proper financial modelling was done by the Government prior to the preparation or implementation of the national budget. We are hopeful that this is not the case and urge the Government to dispel this notion by releasing their detailed projections to the public. The revised projections will ideally factor in the purchase of the Grand Lucayan, the tax revenue forgone for breadbasket items, VAT exempt implications for insurance products and medicines, the increase in the VAT exempt minimum threshold for BPL customers and reversal of the tax treatment for owner-occupied dwellings.

In releasing the economic impact analysis, the Bahamian people will be better informed on the anticipated impact on Gross Domestic Product (GDP), unemployment, the poverty index, inflation and consequently economic growth projections. The Bahamian people are intelligent and can decipher information for themselves. This is the least that we can expect from the people’s time government.

 

Arinthia S. Komolafe

Deputy Leader, Democratic National Alliance

Moody’s: Government must address fiscal policy credibility

Moody’s: Government must address fiscal policy credibility

In the absence of an articulated economic growth plan, a robust national disaster risk management framework and demonstrated commitment to fiscal prudence, it is difficult to envision how the current administration will be able to address the concerns raised by Moody’s. Further, the absence of these vital elements undermines the ability of the Government to reverse the negative outlook, stave off any further downgrades of our sovereign rating or improve our existing rating.

Labor Statistics: Evidence of Lack of Economic Growth Plan

One year after the current administration assumed office, the economy remains challenged.

According to the preliminary results of the Labor Force Survey for May 2018 recently released by the Department of Statistics, there has been deterioration in macroeconomic indicators since this administration was elected.

While this is not surprising for a Government that lacks an economic growth plan, it is detrimental to Bahamians who continue to be disenfranchised and face significant hardship.

There is no need for political rhetoric in these serious times as the numbers tell the story.

 

  • In May 2017, the national unemployment rate was 9.9%. In May 2018, the unemployment rate was 10.0%.

  • In May 2017, the unemployment rate in Grand Bahama was 12.4%. In May 2018, the rate remains high at 12.4%.

  • In May 2017, the unemployment rate in Abaco was 7.8%. One year later, that rate has increased significantly to 10.7%.

  • In spite of the employment of thousands by Baha Mar over the past year, unemployment in New Providence remains effectively the same; falling merely from 10.4% to 10.0% in May 2018.  

  • Youth unemployment has risen from 20.1% in May 2017 to a whopping 24.1% in May 2018.

  • The number of discouraged workers has risen from 1,925 in May 2017 to 2,175 in May 2018.

  • The unemployed labor force has increased to 23,190 in May 2018 from 21,880 in May 2017.

  • Government recurrent expenditure has increased from a projected $2.1B for 2017/18 to an estimated $2.6B for 2018/19.

  • Government capital expenditure has risen from a projected $233M in 2017/18 to approximately $300M for 2018/19.

 

These statistics show that in the absence of policy initiatives aimed at incentivizing the private sector, the economy has remained stagnant. The increase in the unemployment rate between May 2017 and November 2017 was attributed in part to the termination of 2,555 individuals from the public sector by the Government in a struggling economy. The May 2018 report suggests that there has been no correction to the labor market as the private sector has not created enough jobs to compensate for these losses and new entrants into the labor market.

 

Bahamians are waking up to the reality that electing a Government without a plan in general and an economic growth plan in particular has serious consequences. It is simply impossible to tax and borrow our way out of our fiscal predicament. Further, austerity without an accompanying plan to grow the economy could imperil the economic fortunes of a nation.

 

The recent labor force survey in May 2018 follows a significant employment drive by Baha Mar and what has been touted as a spectacular and record breaking first quarter for the tourism industry in The Bahamas. We can only imagine what the labor force survey would have shown had Baha Mar not been the main driver of economic activity since May 2017.

 

The IMF has been quoted as stating that The Bahamas needs 5.5% economic growth to absorb all new entrants into the Bahamian workforce and to cut existing jobless rates in half. Deliberate actions, steps and initiatives have to be undertaken to achieve the desired and target growth levels. It is reckless and irresponsible to leave this important policy making role of the Government to chance, luck or coincidence. The Bahamas needs a plan that will ensure sustainable economic growth and insulate the nation from external shocks. We join all Bahamians to implore the Government to produce and implement such a viable economic growth plan.  

 

It should be noted that the dismal record of the Government on the economy was achieved prior to the implementation of a 60% increase in the Value Added Tax rate to 12%. The labor force survey took place between April and May of 2018. The VAT increase and other revenue measures which came into effect on July 1, 2018 are expected to impact investor and consumer confidence while threatening the job security of Bahamians. This targeted assault on a shrinking middle class and anticipated reduction in the disposable income of consumers could further dampen demand to the detriment of an already fragile economy.

 

Indeed, the numbers don't lie and Bahamians are saying what a difference a year makes. The Democratic National Alliance stands ready to assist the Government in developing an economic plan that will result in sustainable economic growth.

 

Arinthia S. Komolafe, Deputy Leader

Democratic National Alliance