DPM: COVID-19 economic blow projected at $258 mil. to $1 bil.

DPM: COVID-19 economic blow projected at $258 mil. to $1 bil.
Deputy Prime Minister K Peter Turnquest (photo credit: BIS/Yontalay Bowe)
  • Gov’t outlines measures to mitigate COVID-19 fall-out, no plans for add. borrowing

  • High impact projections indicate potential $1 billion total economic loss, $832 million decline in lost tourism related expenditure

  • Water and Sewerage ordered to reconnect all recently disconnected services for residential customers

  • Utility bills deferred for three months for those who contract COVID-19, are quarantines or laid off.

NASSAU, BAHAMAS — Deputy Prime Minister and Minister of Finance K Peter Turnquest yesterday encouraged Bahamians “not to panic or despair” as he unveiled in Parliament a package of policy measures to mitigate the economic fall-out from the COVID-19 global pandemic.

Turnquest noted that “in the best of times’ the Bahamian economy would not escape a global health crisis such as the one being faced.

He underscored the country is still reeling from the devastating impacting of Hurricane Dorian on Grand Bahama and Abaco, adding economic growth in the short term will be negatively affected.

“Many people are understandably afraid. I want to ensure Bahamian families we will get through this challenge together and we will get through it healthy, stable and strong,” Turnquest said.

“These are uncertain and unprecedented times for sure. Nevertheless I encourage Bahamians not to panic or despair.

The finance minister called for discipline, adding the virus is a “challenge we can overcome”.

The Ministry of Finance had created three models scenarios of low, medium and high impact of the COVID-19 impact, he said.

“The projections are by no means precise and all encompassing as fall-out in tourism will have a cascading impact on a  number of sectors in the domestic economy,” Turnquest said.

“While the total economic impact could be as as low as $258 million over the next four months to June 2022, we are inclined to focus on the higher impact scenario which assumes 100 per cent loss of cruise visitors and 80 per cent of stopover visitors. In fact recent developments in the industry suggest a tilting of the possible actual outcome to this extreme scenario which would result in a total economic loss including additional public sector requirements of as much as $1 billion,” Turnquest said.

Projections indicate a $832 million decline in lost tourism related expenditure as a result of a reduced visitors.

Turnquest said a projected $48 million would be lost in border taxes, and $60 million in VAT and import duty losses.

He also noted, based on preliminary projections, external reserves could decline by some $900 million by year end-2020.

Turnquest noted that in addition to the nearly $5 million already earmarked for healthcare response to the COVID- 19 virus, the government is  allocating up to an additional $11 million to cover detection, isolation, treatment and other COVID-19 mitigation activities.

The government is also setting aside  $4 million to provide food assistance and social support for displaced workers directly impacted by the virus, through the Ministry of Social Services.

“These food assistance vouchers, of $100 every second week will be targeted primarily to persons within the hospitality industry who are facing reduced work weeks.  This allocation will allow for up to eight weeks of benefit payments but may be adjusted according to need,” Turnquest said.

The government is allocating $10 million to provide for a temporary unemployment benefit, administered through the National Insurance Board, for self-employed persons working in the tourism industry.

“Self-employed persons, such as straw vendors, tour operators and jet ski operators, do not ordinarily qualify for the National Insurance unemployment benefit as part of their benefits package. However, the Government is making a special accommodation for those self-employed individuals in the tourism industry, given the unprecedented COVID-19 impact,” said Turnquest.

“For persons in this category, the Government will offer a sponsored unemployment assistance of $200 per week, for up to eight weeks. To qualify, these self-employed persons must be currently registered with NIB or they must register at the time of application for this benefit.  The time frame for this benefit may be adjusted according to need.”

Turnquest confirmed that under the normal provisions of the NIB insurance scheme, individuals who contract COVID-19 or are quarantined because of exposure or suspected exposure will be eligible for sickness benefits.

Also, individuals who are temporarily laid off because of the economic impacts of COVID-19 will be eligible for unemployment benefits, up to the regular thirteen-week period, if necessary.

Among other measured being introduced is a $20 million in short term loan support to Bahamian small businesses impacted by the current COVID-19 pandemic.

“This allocation is to be funded in part by utilization of an additional $10 million of the extinguished dormant accounts fund held by the Central Bank.  Eligibility would include confirming that the business has been in existence for over 1 year, a commitment to retain most of the existing staff complement, and a plan to utilize the proceeds of the loan to ensure business continuity,” the finance minister explained.

The Government has requested that Water and Sewerage reconnect all recently disconnected services for residential customers to ensure that personal hygiene is not compromised.

“Further, the government is also directing both Water & Sewerage and BPL to defer payment of bills – for an initial period of three months for residential customers who are diagnosed with the virus, who are in quarantine, or have been laid off.

“I must stress that this allowance is for this specific group of persons and that it is important that these impacted persons contact BPL and Water & Sewerage to register for this benefit and verify their situation as necessary,” said Turnquest.

Turnquest noted that the Ministry of Finance has included the Clearing Banks Association in our consultation on the proposed mitigating measures to address the current situation.

“The banks have reiterated to me their commitment to helping their clients through challenging times,” he continued.

“They have advised that if persons are experiencing financial difficulties during this period, that they should contact their banks to understand the options that are available to them, such as payment deferrals, credit limit increases, or other measures to offer temporary relief.

“As this issue progresses, the banks have stated their intent to offer more tailored products and services to persons who financially are negatively impacted by the economic effects of COVID-19.  The banks have however stressed that for now, it is important that clients who – because of their changing circumstances – find themselves in financial duress, that these customers should go in before they fall into arrears so that their specific situation can be assessed and addressed within the range of the banks’ available tools,” he said.

Turnquest told Parliament that the government’s plan is to first utilize our existing contingency reserves and to reprioritize expenditure to remain within the limits of the recently revised borrowing envelope for the current fiscal year.

“Should it become necessary, the Government could consider among its funding support options, accessing the International Monetary Fund’s non-conditional Rapid Credit Facility—with current eligibility placed at a maximum of $200 million,” he said.

“Simply put, we have no plans to request additional borrowings at this time, as we are diligently managing the country’s debt levels.”