During the swearing-in ceremony for the new President of the Court of Appeal last week, the Prime Minister and Minister of Finance had another one of his series of unflattering moments. While Bahamians have come to accept that we have an out of touch and insensitive leader, Davis’ remarks in response to the International Monetary Fund’s (IMF) recent observations were embarrassing and confusing at the same time.
It is clear that the silly season is upon us and the governing PLP is in campaign mode having squandered almost four years at the helm of the nation. However, there are some things that can simply not be spinned or argued in the presence of indisputable and glaring facts. In this regard, facts are superior to feelings and emotions. The facts are simply the facts whether we like them or not. Let’s take a quick look at what transpired.
What the IMF said
On January 17, 2025, the IMF issued a comprehensive statement following its conclusion of the Article IV consultation with The Bahamas. In the referenced statement the IMF noted among other things, the following:
“The Bahamian economy has staged a remarkable recovery since the pandemic, fueled by a strong rebound in tourism. With economic activity back to pre-Hurricane Dorian levels, growth is slowing – expanding by 1.8 percent in the first half of 2024….Inflation is now modestly negative, but the cost of living remains high. Financing costs have declined, driven by global factors, but gross financing needs remain high…Growth is expected to converge to its long-run potential of 1.5 percent over the medium term…Fiscal vulnerabilities, particularly due to high gross fiscal financing needs, and the ever present risk from natural disasters remain constant threats….Directors observed that elevated public debt, structural bottlenecks to growth, and high exposure to natural disasters continue to pose significant challenges..”
The Finance Minister Responds
In response to the IMF’s observations and commentary, the nation’s Finance Minister was expected to provide a thoughtful and fact-based statement. This writer would not have believed Davis’ response if video evidence had not been available. Here was the PM’s response:
“First of all , that is their prediction. We have our own predictions. We don’t see a slowing down in the economy as yet. There are some headwinds for us but it is not in the economy, it is the obligations that have been incurred over the years that is holding us back. We see the observations made by them but we will ensure that we continue to ensure that our economy grows and not slows”. What exactly about the IMF’s observations does our Prime Minister disagree with? What alternative predictions does the government have and how do these predictions compare to that of the IMF, rating agencies and the Central Bank of The Bahamas? What are the headwinds and how are they isolated from the economy? What exactly is holding the Davis-led administration back?
Indisputable and Raw Facts
According to IMF data, real GDP growth averaged 1.4 percent between 1991 and 2018. Real GDP contracted by 1.4 percent in 2019 – the year Hurricane Dorian devastated The Bahamas and its economy. The COVID pandemic inflicted significant damage on the global economy in 2020 resulting in the contraction of the real GDP of The Bahamas (a nation heavily dependent on tourism) by a massive 21.4 percent.
As economies around the globe reopened, recovery was inevitable and The Bahamas’ real GDP grew by an unorthodox 15.4 percent in 2021. This remarkable recovery as noted by the IMF commenced under the former FNM administration as the PLP only assumed office in the final three months of 2021. The recovery continued in 2022 with real GDP growth of 10.8 percent but began to level off to pre-pandemic levels with real GDP growth of 2.6 percent in 2023. Real GDP growth is projected to be a mere 1.9 percent in 2024, 1.7 percent in 2025, 1.6 percent in 2026 and 1.5 percent in 2027, 2028 and 2029 respectively. In comparison to the Draft Estimates of Revenue & Expenditure presented by Finance Minister Davis, the IMF figures are identical. Davis estimated real GDP growth rates at 1.1% for 2023/24, 1.7% for 2024/25, 1.7% for 2025/26 and 1.5% for 2026/27.
The Truth hurts the PLP
Davis’ denial of the unadulterated facts seems to be driven by the deviation of the real figures from the fictional picture created by his administration. The truth simply does not align with the PM’s messianic posture as he seeks to convince unaware Bahamians that he saved the Bahamian economy and brought us back from fiscal ruin. Despite the record tourist numbers and grandiose announcements have simply not translated into high real GDP growth percentage for our nation. The Bahamas has continued the trend of breaking records with tourist arrival numbers but the majority of these tourists have been cruise passengers who spend little as opposed to high value stopover visitors.
The Davis-led PLP administration has also conveniently ignored the reality that the remarkable recovery which most nations around the world experienced post-COVID, commenced under the FNM and was sparked by the simple reopening of the economy; not due to any major reforms or actions by the “New Day” government. The sharp contraction of 21.4 percent in 2020 was expected with the closure of our borders like other nations as the pandemic wreaked havoc on countries’ economies.
Replace denial with a plan
The Finance Minister should resist the temptation to take the IMF’s observations to heart. The comments are not an attack on his government but could be construed as an indictment by the Bahamian people. Nevertheless, Davis should not take it personal noting that the IMF didn’t state that the Bahamian economy is not growing; they only stated the obvious that economic growth is slowing.
Pent-up demand and revenge travel by tourists who benefited from savings and stimulus programs during the pandemic sparked a major increase in spending with our tourism-dependent nation benefiting significantly. After the 2020 contraction, our economy could only go up but this extraordinary phenomenon couldn’t last forever. The stated facts may be difficult to swallow but Davis must find the courage to accept responsibility as Finance Minister and Prime Minister for the state of the economy. Rather than being on the defensive, the PM should present his economic growth plan and outline how he intends to reverse the low growth trend in an economy still with a junk bond rating.
Written by: Arinthia S. Komolafe
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