The Central bank of the Bahamas (CBB) says expectations are that the domestic economy could post a flat outturn in 2020, with a recovery in 2021, as pre-Hurricane Dorian capacity is restored.
But in its ‘Monthly Economic and Financial Developments January 2020’, the CBB warned that new risks are present given the evolving conditions around the impact of the coronavirus global economic activity and travel.
“Reinsurance receipts, along with donations from international and domestic sources are expected to mitigate some of the shortfall in revenue.”— Central Bank of the Bahamas
“With this caution, in the short to medium term, gains, within the tourism sector are expected to be supported by activity within New Providence and the other unaffected Family Islands. Further, the boost to construction output is anticipated to persist, in line with hotel sector investments and hurricane rebuilding efforts,” the bank said.
Government’s fiscal position
It said that in this environment, the jobless rate is projected to rise in the near-term, until losses in Abaco and Grand Bahama, the two islands severely affected by the passage of Hurricane Dorian last year that left damage estimated at US$3.4 billion, are neutralised from gains in the construction sector or foreign investment activity.
Meanwhile, domestic inflationary pressures are expected to remain contained, notwithstanding ongoing geopolitical tensions and domestic electricity cost surcharge.
With regard to the fiscal sector, the CBB said necessary external borrowing for hurricane reconstruction work and social welfare outflows are expected to weigh heavily on the government’s fiscal position.
“However, reinsurance receipts, along with donations from international and domestic sources are expected to mitigate some of the shortfall in revenue. Monetary sector developments will continue to feature elevated liquidity conditions, owing to banks cautious lending posture, in addition to growth in the deposit base. The trend of healthy external reserve balances is anticipated to be sustained in the short-term, benefitting from government’s external financing proceeds and reinsurance inflows,” CBB said.