Central Bank Governor John Rolle indicated that the economy is strong due to developing countries picking up steam.
Mr. Rolle explained at his quarterly media briefing yesterday that although there is more uncertainty about the speed in which these countries would grow over the next next few years, the support for tourism has been maintained and linked mostly to healthy confidence in U.S. households.
He said, “In this regard, the available information points to continued growth in the Bahamian economy due to the first quarter of 2019, with tourism providing the strongest support, and foreign investment continuing to drive construction activity.”
While Mr. Rolle admits the economy is indeed strengthening, he accepted that there is room for improvement.
He said, “when we see, for example a 20-something per cent jump in estimated revenue from the tourism sector, that’s happening because we just had the huge amount of rooms added.
“Also, there’s a take-off in terms of people interested in vacation rental. To continuously see that kind of growth would mean that someone is continuously adding large amounts of capacity, and you’re attracting the airlift and port facility to keep up with the traffic volumes.”, he added.
Mr. Rolle said, “based upon how the infrastructure is set today, everything that we look at says that once you’ve gotten over this adjustment, your growth rate is now averaging slightly below the two per cent range. By most measures, that’s not considered a satisfactory projection for The Bahamas.”
The Central Bank Governor added that the long and medium term focus is to ensure that one and a half per cent improves, which calls for added focus on investments or productive ways to generate good revenue growth.
A nine-month fiscal performance snapshot indicated that the government has collected a little over 55 per cent of its budgeted revenue from the increase of Value Added Tax (VAT).
On that topic, Mr. Rolle indicated that he is not concerned how the economy adjusted in the very near term when the government makes adjustments in its policies.
“What is more important is what the adjustments means for the economy 3, 5, and 10 years out. That’s a part of this.”, he said.
He added, “when you increase the taxes, there’s going to be some adjustments in demand. However, if it is being carried in the context where other forces and momentum are propelling the economy higher, those will dominate eventually.”
He said that the Central Bank also expects that improved health in the public’s finances are going to have its own set of benefits and rewards.
The Governor added that there are some painful measures, given some of the difficult stakes that exist.
In all of those cases, he said, there may be a slight initial adjustment giving a mixed message. However, he said, one must focus on the long-term measures.
