The pandemic, the people and the economy: Where have we come from and where are we going?

There are three narratives on the Bahamian economy that have been written since the beginning of the COVID-19 pandemic, nay since Hurricane Dorian wreaked havoc on two of The Bahamas’ most important islands (economically speaking).

A respected foreign economist has on more than one occasion prophesied this country’s decline into debt default. This idea has been shunned by local experts.

The Progressive Liberal Party-led (PLP) government, in power only since September, has declared the 

country is not at risk of default, has lowered the value-added tax (VAT) rate from 12 to 10 percent and adjusted the previous government’s budget to show improved revenue collection this fiscal year (2021/2022). This narrative will play itself out over the coming fiscal periods.

The third narrative is that of the people, and it remains a skewed view of the country’s economic plight.

On the ground, things do not appear to have changed drastically for the haves and have-nots of The Bahamas, whether home-grown, naturalized and economically planted.

While the tourism sector has rebounded, many hospitality sector workers remain unemployed, and unemployment remains elevated and is forecast to remain that way for the near future.

The shrinking middle-class continues to bob on a lower economic boundary given the country’s regressive tax system, and the wealthy of The Bahamas continue to enjoy the luxuries the economic structure of the country affords those with means.

Economists globally believe that 2022 will usher in high inflation.

For The Bahamas, nobody knows what that will look like, though former Prime Minister Dr. Hubert Minnis continues to contend that an early election was necessary because the doom and gloom foreshadowed for 2022 required a new mandate for government.

Undoubtedly, the world and world economies are in flux because of the continuing COVID-19 pandemic, and while the Omicron variant threatens to sink countries back to where they were in March of 2020, there is absolutely no appetite for the rules and restrictions imposed on so many people for so long last year.

The PLP administration has taken the stance that humanity must learn to live with COVID-19 and thus has begun to let public health measures ebb and flow with the rise and fall in infections instead of keeping the country locked in a state of emergency.

For now, tourism, the lifeblood of the country, will continue to pour dollars into the economy, keeping external reserves boosted and Bahamians employed.

Economic expert and Managing Consultant of Next Level Solutions Hubert Edwards agreed that the government is likely to shun extreme lockdown measures in the face of increases in COVID-19 cases, which will ensure that tourism will continue to recover in lockstep with the current travel appetite of North Americans.

“I certainly don’t believe, just watching the behavior of the current administration that we are really going to rush back into any form of lockdowns, which is really our Achilles heel, so as long as there is some tourism activity, I think we’re going to be better off than we were in the last 18 months or so,” Edwards said.

“Obviously the new variant is an x-factor and we really have to keep an eye on the development and what impact it could effectively have on the economy going forward.”

Despite the new variant, economic indicators remain strong.

There is still extremely high interest from foreigners in luxury real estate in The Bahamas, which is also driving the all-important foreign currency increases this country desperately needs.

Foreign direct investor interest in The Bahamas remains high.

For Grand Bahama, Royal Caribbean International’s continued interest in the Grand Lucayan hotel and the redevelopment of Freeport’s cruise port is welcomed news.

The Central Bank of The Bahamas continues to tout the ongoing strength of the construction sector to produce employment.

The government also continues to lean on the hope that the Access Accelerator/Small Business Development Centre will continue to produce viable businesses that increase employment and expand the gross domestic product of the country.

On the tourism front, Airbnb users continue to increase in The Bahamas and new Bahamians continue to enter the market, widening the important stopover tourist segment where most of the tourist money in the country is earned.

Edwards agrees that inflation next year will bring hardship for many Bahamians, but especially the poor, who, while they will enjoy the decrease in VAT to 10 percent, have lost the zero-rating on breadbasket items which will likely be hit by inflation due to ongoing shipping and labor issues globally.

“Because The Bahamas imports such a large proportion of its goods and in some instances services, we are effectively importing inflation and we can see from what’s happening, especially in the United States which is our largest trade partner, that goods are increasing, the supply chains are lengthening, and food has taken a big hit,” he said.

According to a recent Oxford Economics research briefing, household balance sheets continue to remain robust, with “savings and total financial assets well above pre-crisis level”.

While it may be said in jest, Bahamians seem to not be spending any more (than pre-crisis), but they sure seem to not be spending any less (while helping the recovery of the Bahamian economy).

Lockdowns left businesses in limbo. Some businesses closed. Now, money is being made once again.

Oxford Economics explains that on a global level while businesses are “tempering their optimism”, the melancholy caused by the pandemic seems to be waning.

“This is an encouraging sign, given the importance of business sentiment as a leading indicator for global investment,” Oxford Economics explains.

“Part of the buoyancy of business sentiment certainly comes from the strength in new orders, which have held up well in 2021.”

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