Despite the decline in economic growth during 2001, there was no aggregate loss of employment in the financial services sector and, in fact, the sector's contribution to the gross domestic product was reported to have increased by 7%, totallng $432 million. Employment growth has been attributed in part to the increase in compliance and other personnel needed in the wake of an enhanced regulatory regime for the sector.
In a recent address to the Bahamas Chamber of Commerce, the Central Bank Governor said the new legislation was seen to be essential in that it safeguarded the financial services sector's reputation. "From our point of view, one does need to weigh this cost [compliance related] against the belief that this more comprehensive regulatory system in the longer term is more beneficial to our financial services sector", he said.
External reserves came under increased pressure in the third quarter of 2001, and currently have decreased from the same period last year, being recorded at $380 million during May 2002. Mr. Francis pointed out that the situation was not as severe as one might have expected over the preceding 8 months, and although present growth is limited, figures available do not predict any undue shrinkage.
Acknowledging the focus on financial services by the new Government, Governor Francis felt there is no question that success in financial services, like any number of other sectors of economic activity, today is no longer accidental. "You have to be entirely purposed in how your approach this business," he said. The Government's focus on the industry should make it possible for The Bahamas to devote the resources required to do that. "I do want to say that I have a great deal of confidence in the future of the economy of The Bahamas, generally. The Bahamas has the elements to succeed well in what we do."
The country's new Ministry of Financial Services and Investments has announced its intention to present a Five-Year Strategic Plan for further development of the financial services sector in September.
Currently, Gross Domestic Product is estimated at $5.1 billion, with per capita income at $16,000. This positions The Bahamas with the third highest per capita income among independent states in the Western Hemisphere, following only the United States and Canada.
Moody's Investor Services latest review confirmed an A-1 credit rating for Government's domestic debt, with an A-3 rating on international or foreign currency obligations.
Economic Rebound Anticipated
Providing the view that the economy is "marking time" while its primary industry - tourism - awaits the US recovery, the Central Bank Governor has said that the economic rebound forecast for the fourth quarter of the year is still valid.
The International Monetary Fund estimates that world economic expansion was nearly halved to 2.4% in 2001 from an estimated 4.8% in 2000. In the United States, economic growth fell to 1.2% from 4.1% the previous year. Global output growth projections are 2.8% this year, and 4.0% in 2003. According to the IMF, the US is leading the revival, with projections for 2002 now recorded at 2.3% growth, up from the marginal forecast earlier in the year.
During debate on the country's 2002/2003 Budget, Prime Minister Perry G. Christie pointed out that the experience of the post 11 September, 2001 shock to the tourism sector was an indication of how external events affect the economy of The Bahamas. "This experience reinforces the point that we must exercise discipline in ensuring that we safeguard the international competitiveness of the Bahamian economy", he said. The Prime Minister further said that his government's primary responsibility is to ensure an improvement in social welfare, and that can be achieved only through the pursuit of sound and prudent macroeconomic management. The country's social agenda thus will be moved forward within the context of a growing economy.
The Budget, recently approved in the Senate after passage in the House of Assembly, aims at regenerating the economy by improving the macroeconomic environment and creating the conditions conducive to investment.