“You just have to trust that the global economy will readjust in the shortest possible time”
NASSAU, BAHAMAS — Financial Secretary Simon Wilson said yesterday that while the government is somewhat concerned about the high inflationary environment, given the elasticity of the country’s tax base, the government’s fiscal goals should not be adversely affected.
Wilson, who was speaking at a press briefing at the Office of the Prime Minister yesterday, while responding to Eyewitness News inquiries, stated: “A high inflationary environment is a more challenging fiscal environment to operate under.
“Yes, we are somewhat concerned because of the high inflationary environment, however, you can make your adjustments.
“Our projections in the Fiscal Strategy Report is over a five-year period. The key thing in that projection is that the goal is to increase revenue-to-GDP to 25 percent from where it is now currently.
“We believe that, given the elasticity of our tax base, the high inflation environment will not impact us in achieving that goal.”
Wilson added: “Obviously, inflation will provide more pressure on the expenditure side because there will be a demand for increased wages as well as goods and services. It is something we have to manage.
“We have been blessed to be in [a] low-inflation environment for an extended period but it’s not unusual for government operate in an environment where inflation is high.
“You just have to trust that the global economy will readjust in the shortest possible time.”
The government’s macroeconomic outlook, as outlined in its Medium-Term Debt Management Strategy, points to a continued strengthening of the economic recovery underway since the second half of 2020.
“This is grounded in expectations for a continuation of the stronger-than-earlier-anticipated rebound of the dominant tourism activity to pre-pandemic levels, and supported by prospective positive yields from the government’s economic policy initiatives aimed at increasing foreign direct investment (FDI) and improving the competitiveness of the economy through more business-friendly conditions,” the report noted.
“Growth in real GDP…is forecasted to improve to around 6.9 percent in FY2021/22 from the steep 8.4 percent falloff in FY2020/21, and moderate to 5.8 percent in FY2022/23 before leveling off to 2.6 percent in FY2024/25.”
The government has articulated its intent to introduce enhanced revenue administrative measures aimed at increasing the tax base by minimizing leakages and to pursue tax policy reforms to strengthen revenue collections.
– Medium-Term Debt Management Strategy Report
The report further noted that “price conditions are expected to tighten somewhat in FY2022/23 and FY2023/25, under the impact of the persistence of the ongoing supply chain disruptions — although with consumer price inflation remaining in the lower single digits”.
“As set out in the 2021 FSR, the government is targeting an overall fiscal deficit of $415.2 million or 3.3 percent of GDP for FY2022/23, improving to $263.7 million in FY2023/24 and achieving near balance in FY2024/25, with the overall deficit narrowing to $67.9 million or 0.5 percent of GDP — which is the fiscal target established in the FRA,” the report noted.
“Regarding revenue projections, the government has articulated its intent to introduce enhanced revenue administrative measures, aimed at increasing the tax base by minimizing leakages and to pursue tax policy reforms to strengthen revenue collections over the medium term.
“Through effective implementation of these initiatives, total revenue is expected to progressively improve from a projected 20.2 percent of GDP in FY2021/22 to 24.5 percent of GDP in FY2024/25.”
With regards to spending, recurrent outlays are forecasted to decline by 4.9 percent in FY2022/23 to approximate 22 percent of GDP and hold steady at this level through the remaining two years to FY2024/25, as spending levels normalize after the exceptional pressures imposed by COVID-19 and Hurricane Dorian.
“Similarly, the policy for capital expenditure is to maintain these outlays at three percent of GDP throughout the medium term, as the government also intends to leverage public-private partnerships to achieve its infrastructure goals,” the report noted.
