In 2012, there was little healing for the battered economy. The state of the economy was a key issue in the lead-up to the May general election, and in the months after, the government struggled with the challenge. Not long after winning the election, Prime Minister Perry Christie, who is also minister of finance, presented a new budget to Parliament. Christie said the government planned to borrow $504 million to cover the deficit left by the Ingraham administration. The GFS deficit in 2011/2012 was projected at $504 million, up by a full $256 million from the previous government's estimate of $248 million.
Government debt at the end of the 2011/2012 fiscal year was projected at just over $4 billion or 50.6 percent of GDP. In October, the International Monetary Fund (IMF) revised the growth outlook for The Bahamas for next year from 3.5 percent down to 2.7 percent. Growth is projected to be 2.5 percent this year. "We had anticipated that we were going to be growing faster next year, now we have this downgrade of the growth projections," said Minister of State for Finance Michael Halkitis, who led a Bahamian delegation to IMF and World Bank meetings in Tokyo.
"We're going to still do all we can to get the economy growing, but I think we just need to have an open conversation, and a frank conversation with the Bahamian people." Like many other countries, The Bahamas continues to battle low growth, high unemployment, a high public sector wage bill and limited flexibility. "Six years ago, we were at 35 percent debt to GDP; now we're close to 60, I think," Halkitis told The Nassau Guardian as he assessed the challenges still faced by the Bahamian economy.
While the rate of unemployment in The Bahamas fell from 15.9 percent in November 2011 to 14.7 percent in May 2012 (the latest figure), that double digit jobless rate reflects the slowness in job creation as the economy remains burdened four years after the global maelstrom took hold. The Bahamas government is currently banking on the several thousand permanent jobs to be created by the Baha Mar development. But that will not be completed until 2014. More immediately, Prime Minister Christie has promised around 600 jobs from a new casino in Bimini.
But that's a small number compared to what is needed, and Christie has acknowledged the pressures faced by the new government in matching reality with expectations. In December, the international credit ratings agency Moody's downgraded The Bahamas' credit rating from A3 to Baa1. In addition, Moody's said the country's economic outlook remains negative. "We see limited prospects for the fiscal consolidation necessary to strengthen the government's balance sheet and stabilize debt levels," said the Moody's rating action.
Moody's cited three driving factors for the decrease: Limited growth prospects and weak recovery in tourism and construction; significant and rapid deterioration of the government's balance sheet exacerbated by a low revenue base, and high and rising levels of debt and weakening of debt sustainability relative to other countries. Last Tuesday, Prime Minister Christie said he was optimistic despite the challenges. "My government will take care of itself, but next year I hope that we are able to continue to reduce the incidence of crime to make a real impact on that, and secondly, or concomitantly, to have the economy pick up," he said.
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