Hotel reopenings bode well for GDP growth, notes DPM

With the announcement of the reopening of Baha Mar and Atlantis, there are already indications that tourism revenue will begin to increase in the new year and provide a “significant” impetus for gross domestic product (GDP) growth in 2021 and 2022, Deputy Prime Minister and Minister of Finance Peter Turnquest said yesterday, adding that the country will likely have to borrow $800 million in fiscal year 2021/2022.

Turnquest, who was a speaker at the Bahamas Institute of Chartered Accountants’ (BICA) Accountants’ Week seminar, said the successful introduction and deployment of a vaccine will also be key to boosting tourism revenue in the coming year. He added, though, that Bahamians have to continue to drive infection numbers down.

“A vaccine looks promising based upon the latest news, but success is based also on our own ability to manage the spread of infections in the community, as that is critical to the tourism sector in particular,” Turnquest said.

While the COVID-19 pandemic has left government strapped for cash, Turnquest reiterated yesterday that there is no intention to increase taxes, but to increase efficiencies in the government.

According to Turnquest, once the economy begins to pick up there will be further contraction in government spending in order to get the country back to the previously set fiscal target of 0.5 percent debt to GDP.

“If everything holds we expect to start dropping the level of borrowing and start bringing our fiscal consolidation program back on track, with a revised fiscal consolidation date of 2024/2025,” he said.

In terms of the government’s historic $1.4 billion borrowing for the 2020/2021 fiscal year, he said government will seek to refinance its US$600 million loan in three years if a better interest rate is available. 

“We want to be careful we do not over extend ourselves in the international markets at this time, because those rates will burden our recurrent budget for several years to come, as well as potentially set us up for a situation that is unsustainable in the long term,” Turnquest said.

“We want to manage that international exposure as best we can. We did go out a little heavier than we normally would in the international market this year to try and support the currency peg in the event that something seriously bad happens.”

He added that there is 24 percent of the budgeted $1.4 billion left to borrow, which will be sourced in the domestic economy in Bahamian dollars “at better rates hopefully”.

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source https://thenassauguardian.com/hotel-reopenings-bode-well-for-gdp-growth-notes-dpm/