Central Bank: Near-term economic outlook ‘uncertain and contradictory’

Central Bank: Near-term economic outlook ‘uncertain and contradictory’
The Central Bank of The Bahamas logo.

NASSAU, BAHAMAS — The near term economic outlook for The Bahamas has become “uncertain and contractionary” given the COVID-19 pandemic, according to the Central Bank.

The bank noted tourism earnings are expected to decline sharply in its recently released quarterly economic review for the fourth quarter of 2019.

“Given the Coronavirus (COVID-19) pandemic, the near-term economic outlook for The Bahamas has become uncertain and contractionary,” the bank stated.

“Tourism earnings are projected to decline sharply in 2020, becoming particularly acute over the second quarter; and moderately evident even before the end of the first quarter.”

The Central Bank said the trend will lead to a large reduction in net foreign currency receipts and consequently a sizeable falloff in the Central Bank’s external reserves.

“Foreign reserves are, nevertheless, sufficient to absorb essential domestic foreign currency needs,” the regulator continued.

“In particular, outflows associated with tourism sector inputs have abated with the lull in the industry; non-essential domestic overseas expenditures, such as travel, are projected to abate until public health confidence recovers; and the economy stands to benefit from a considerable softening in international oil prices.”

It also pointed out that the government’s budgetary financing  includes anticipated foreign currency borrowing that should supplement foreign exchange needs.

The bank stated: “Meanwhile, the domestic banking system is mobilized, given healthy capital buffers, to forbear, with likely increased debt servicing difficulties among businesses and households, and to prudently supply new credit when a recovery path opens up.

“The greater uncertainty for the economy though, is that the duration of the slowdown in tourism and the speed of the anticipated recovery are still unclear, and dependent on progress on the international public health front.”