The Bahamian economy will likely feel the impact in the coming months from a 'crisis of confidence' gripping U.S. consumers, according to business experts who participated in a special economic forum last night. But they said the right action by authorities could ensure a softer landing.

The financial experts were discussing the economy as news was emerging that the U.S. Senate had passed a controversial $700 billion 'bailout' of troubled Wall Street institutions. The vote was 75 to 25. The House of Representatives is expected to vote on the Senate measure on Friday.

"I don't think it's sufficient," said Anthony Ferguson, president of CFAL. He made the comment before news broke of the bailout's passage. "I think it's a temporary stop-gap measure. It will provide some form of what I would term temporary confidence in the system."

Ferguson was one of the panelists on 'Financial Voice', a Star 106.5 FM-sponsored forum hosted by Jeffrey Lloyd. Other panelists were CEO of the Bahamas Financial Services Board Wendy Warren, CEO of Bahamas First Insurance Company Patrick Ward, President of Providence Advisors Ken Kerr and former Minister of State for Finance James Smith.

Ferguson said that even with legislators approving the bailout, the U.S. credit market still would not have the liquidity for banks to lend.

But it wasn't all gloom and doom during the special discussion, held at the J. Whitney Pinder Building. Ferguson suggested that there are ways the government could lessen the impact on the local economy.

"Once you have the ability to borrow, times like these are when the government has to step up and create development - i.e. road works, the airport (development) - those things will minimize the impact of soft consumer spending in the economy," Ferguson said.

"So hopefully the authorities in government will look to increase and fast forward the road works, the new building at [Lynden Pindling Airport] and the redevelopment of downtown. And that should minimize the [impact]."

Warren noted that when there's a fire it needs to be put out.

"In the next two months in The Bahamas we have to do two things," she said. "One is seek to manage our economy to make it a softer landing, where you do have the government investing. Hopefully, we can then have businesses also being encouraged to invest. A number of the hotels are going through a refurbishment exercise."

Warren pointed out that now may be a good time for training, but she said it's also a time to look forward and ask "what is the landscape going to be? What are going to be the engines that drive our economy? What are going to be our safeguards? What are going to be the things that we want to do now in light of where we are?"

The Bahamas is still perceived as a safe place to invest money, she said, so the country - from both a tourism and financial services perspective - needs to position itself to pick up whatever money will be spent in the coming months.

"We know there are still wealthy people out there and perhaps the wealthy won't think about flying to Dubai; they might think about flying to The Bahamas instead," said Warren, noting that the challenge for The Bahamas is making sure it's topping the list of choice investment jurisdictions.

She said short-term measures are needed, but so is medium-term thinking.

Smith, the former minister, pointed out that the vast majority of tourists who come to The Bahamas, come from the United States and they may be putting off travel plans at the moment. According to him, this could have significant repercussions for this country well into the new year.

"If we have too many people [putting off travel] the first quarter of next year could be very flat in tourism," he said. "Secondly, that same group of people are the ones who invest here, who buy second homes, for instance, condos, etc. That's where we get our foreign direct investments...that will also be flat."

The country's GDP is made up of three components: Consumer expenditure, investments and government spending, Smith pointed out. "Part of that consumer expenditure would be tourists coming here. So if [fewer] of them are coming here, it means that we are having less consumer expenditure. If they're not going to invest on the same level as they did last year and the year before, there's less investment and it also means that we have less imports," he said.

As a result, the Bahamian economy would likely go into depression whether or not the $700 billion bailout occurs, Smith said. And that's because it may take some time for the crisis of confidence to reverse itself.

He noted that the hotel sector is already feeling the impact of the financial crisis. In a recent Bahamas Hotel Association survey, the vast majority of respondents said they did not expect to make a profit this year.

"It's already here," Smith said of the economic dilemma.

Ward, meanwhile, said there's a 'perfect storm' impacting financial markets across the globe. He said there have been huge investment losses and insurance losses.

"What tends to happen is you don't have both of them happening at the same time," he said. "...when you've got that perfect storm operating together, there's just one sort of outcome and that is that your balance sheet is going to take a major hit."

Ward said passage of the bill would not be sufficient to address the current crisis enveloping the United States and impacting many other countries.

"You've got to have an introduction of sensible legislation, so that some of the things that are occurring are going to be more difficult in the environment going forward," he said.

Ferguson predicted that the $700 bailout would provide a short term boost, but he said the United States probably won't emerge out of its economic recession for another 12 to 18 months, though he stressed that there will be a lot of good opportunities for people who have cash.

"So, I submit to you, that a person who has an investment holding period of three to five years, today is a beautiful day," he said.

Kerr added that the crucial issues that led to the current crisis have to be addressed. He pointed out that all key indicators of financial health in the United States are heading south.

"So the question is how long will it take for the system to cleanse itself before we can even begin to think of a recovery," said Kerr, agreeing with Ferguson that an economic recovery in the United States was at least 12 to 18 months away.

"For those of us who live in the archipelago," he added, "we're further away from feeling the effects of any cleansing, or a system that's on the right foot."

By CANDIA DAMES