Central Bank: Domestic economy may ‘platueau’ in 2020

Central Bank: Domestic economy may ‘platueau’ in 2020
The Central Bank of The Bahamas. (PHOTO COURTESY OF THE CENTRAL BANK)

NASSAU, BAHAMAS – The domestic economy may ‘plateau’ in 2020 before returning to pre-hurricane Dorian growth in 2021, according to the Central Bank.

The Central Bank laid out expectations in its Monthly Economic and Financial Developments report for October 2019.

“Expectations are that the domestic economy will continue to expand at a modest pace during remainder of the year, but may plateau in 2020, before returning to pre-hurricane growth in the subsequent year” it stated.

“Activity within New Providence and some of the other major islands are poised to sustain short to medium-term gains within the tourism sector, until the country’s inventory is fully restored.”

The report stated: “Further, construction output will continue to be underpinned by foreign direct investments, with some impetus from rebuilding efforts, as funding, materials and labor are sourced.”

According to the Central Bank, any gains in employment will likely be seen in the construction sector with more broad-based improvements anticipated, as work progresses with the restoration of damaged hotels and resorts.

“In the fiscal sector, the replacement of lost infrastructure and social spending, combined with Government’s prior commitments, are likely to place a strain on Government’s resources,” the bank noted.

“Revenue shortfalls are expected to be financed mainly through additional domestic and international borrowing; with modest support also from donations from private and official sources.

The Central Bank also noted that in the monetary sector, “continued cautious commercial bank lending posture, alongside added deposit base growth should sustain elevated liquidity conditions over the remainder of the 2019 and 2020”.

“The trend of healthy external reserve balances is expected to be maintained in the short-run, underpinned by Government’s external financing proceeds and re-insurance inflows,” it continued.

“However, a net reduction is forecasted for 2020, as import spending on rebuilding activities intensify, and lower than normal capacity in the tourism sector constrains new private sector inflows.

“In light of the current outlook, the Central Bank will continue to pursue policies that support financial sector stability and are conducive to overall economic recovery,” the regulator noted.

“This includes increased flexibility in lending guidelines for hurricane impacted households and businesses, while maintaining the medium-term focus on reducing excess bank liquidity.”