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From:TheBahamasWeekly.com News
THE PRIME MINISTER: Our economy is contracting. I promised to keep the public informed on this economic crisis as it evolves. I will be frank, candid, straightforward and forthright. Our contracting economy is the result of the crisis in the global economy. As you are aware, the crisis is global in nature and no one -- not even the most qualified economist -- is quite sure whether remedies proposed will bring the desired results. The steady deterioration in the Bahamian economy during the second half of 2008 has nearly eliminated the gains recorded during the first half of the year. Weaknesses has become more entrenched in tourism; visitor arrivals declined by a larger percentage in the year-to-date estimates as compared to the same period last year. Anecdotal evidence suggests that the industry has experienced a deeper seasonal falloff in activity during the September – November 2008 period, alongside sharp declines in projected occupancy rates for the first quarter of 2009, which have contributed to the October and November downsizing in employment. During the first three quarters of the 2008, foreign investment inflows strengthened by 18.8%, slightly ahead of the 15.8% pace of 2007. However, property purchases by international persons, which also supports construction, declined by an estimated 18.9%. With most of the lift to construction occurring in the early months of the year, activity has since subsided. Loans for local mortgage financing from commercial banks, and insurance companies through the end of September show an increase of some 7.6% over last year - 2007. As a result of this economic contraction Government revenue is down. As a consequence we have had to put in place a stand-by facility to increase the Government’s overdraft from $100 million to $150 million with effect from 26 November, 2009. We do not now expect this new limit to become standard and will do our utmost to return to our standard limit as soon as circumstances permit. We will keep the position under continuous, watchful review. To try to ease the impact of the economic downturn, the Bahamas Government will do what is possible and economically and fiscally feasible. You will recall when I addressed the nation on the global crisis last month I advised that there was no complete package of Government’s responses. We undertook to keep developments under review and to respond to these as best our resources permitted. Recently the Prime Minister of Great Britain, the Rt. Hon. Gordon Brown noted that: “It is clear that this is a global problem that requires global solutions …” European Commission President Jose Manuel Barroso, speaking in the European context, said that “exceptional measures should be timely, targeted and temporary”. The health of our local economy is ultimately dependent on the global economy, most especially the economy of the USA. If global solutions are not found then the resources of developed and developing countries, including the Bahamas, will all be severely diminished. Advice to the PublicBahamians are not helpless in this crisis however. The recent craft show demonstrated that there are any number of fine Bahamian made products that can be used as Christmas gifts. For persons who have been laid off with financial packages, I would strongly urge them not to fritter away their money on unnecessary expenditure and Christmas shopping sprees. We do not know how long or how deep this economic crisis will be. Everyone should do their part to improve their ability to withstand the economic downturn confronting us:–
Economic Stimulus PlansThe Government is undertaking a number of actions and accelerating the implementation of planned infrastructural development and expansion to help stimulate the economy at this time.
The design for the new facility is already 60% completed. At the height of construction some 400 construction jobs will be created. In anticipation of construction some businesses are already being relocated. This $175 million project will be funded by loans/bonds and serviced from the operating revenues of the Airport; it is not expected that the borrowings by the Airport Authority will require a Government guarantee. However, to facilitate this construction the Government will assume responsibility for $50 million of the present outstanding debt of the Airport Authority. I note that the Airport Authority/Nassau Development Company (NAD) implemented a $5 increase in the fees at the LPIA. Fees payable for international travel at LPIA are now $20 instead of $15. Just last week I tabled the Notice of the increase in the House of Assembly though I do not recall this having been reported in the press. I apologize to the public that these increases have not been better publicized.
I note that these new office complexes will be financed by the National Insurance Board in a similar manner to arrangements made for the financing of the new Ministry of Health and Ministry of Education Office Complexes and the acquisition of Claughton House. Under these arrangements the Government agrees lease/rent payments to the NIB which provided that entity safe investment options for their funds.
I will make another Report to the Nation in January, as is my custom, and I will present a further update to Parliament in February, 2009 at the time of the Mid-Term Budget Review of the finance and economic performance for the 6 month period July to December, 2008.
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