As the possibility of a war between the United States and Iraq is heightened, the major concern is could The Bahamas sustain another catastrophic external shock to its economy.
A recent survey revealed that 25 percent of local businesses are expecting a loss in profits.
The UN Security Council on Friday unanimously approved a tough new Iraq resolution, aimed at forcing Saddam Hussein to disarm or face “serious consequences”.
With the Bahamian economy, though stagnant, is still rebounding from the September 11 terrorist attacks on the United States, the National Debt around $2 billion, and a Government projection of $60 million revenue shortfall, a war could send this economy into a recession.
Financial analysts who spoke with The Guardian expressed concerns over what some believe an inevitable battle between the US and Iraq.
“I think it is going to have a major impact on The Bahamas in terms of its revenue, but depending on how long the war is, The Bahamas would be one of the first countries to be able to rebound from the war because of being close to the United States,” said Bahamas Chamber of Commerce President Raymond Winder.
He explained that if the Americans feel that the war is being totally controlled by the U.S., then they are likely to feel at ease travelling.
“But, if the war seems to be extended and Iraq seems to be getting its neighbours involved, then the Americans are going to be hesitant in travelling,” Mr. Winder said.
Asked whether The Bahamian economy has truly recovered from September 11, Mr. Winder said that this country was able to attract tourists rather than other Caribbean destinations, which was facing bigger challenges in doing so.
Overall, The Bahamas has not bounced back in a big way because the U.S. economy has not bounced back in a big way,” he said. As far as concerns coming from the business community, Mr. Winder said that industry is stretched. A recent survey shows that some 25 percent of establishments are anticipating a loss and over 75 percent are expecting to make less than the previous years.
“So, you are not dealing with an institution that has a considerable amount of reserves to take them over a long period,” Mr. Winder said. “The Government likewise, considering it is still running a deficit.”
Asked how can Bahamians prepare themselves for a possible recession, Mr. Winder said that the business community would probably be unable to hire, give raises as usual and depending on the length of the war, many establishments might merge in order to stay afloat.
He observed that the latest trend in the business community has seen the consolidation of insurance companies, banks and other establishments.
“I think that our organisation, in order to survive, may find that this process of consolidation is likely to continue, to spread its fixed cost over a larger revenue base,” Mr. Winder said.
Sharing concerns expressed by Mr. Winder is Chairman of Bahamas Employers Confederation (BECon) Brian Nutt who said that “there is definitely the possibility of military action taking place against Iraq.
“We need to recognise in The Bahamas that if that was to take place, that would have an impact on us.”
He said with The Bahamas being a tourism-based economy, there would be less travel to these shores; the economy is down and that would be extended.
Mr. Nutt felt though, that the shorter the war is, the better for the Bahamian economy.
“If it does reach a point where there is a call for military action and it comes swiftly, there would be very little affect on us,” he said. “However, the longer it takes between the time of the failure of Iraq to comply with the mandates of the resolution and the time it takes for the UN to react, those are the types of environment that would probably result in The Bahamas feeling adverse affect.”
For the confederation members, Mr. Nutt said that the organisation is trying to keep abreast with the situation and any action would be based on what transpired between the U.S. and Iraq.
By Lindsay Thompson, The Nassau Guardian
