The Bahamian economy will initially lose $50 million to $100 million as a result of the new 40-hour workweek, which was reduced by 5.5 percent, according to the Governor of the Central Bank, Julian Francis.
Mr Francis was speaking at the Life Underwriters Association of the Bahamas installation of Officers and Achievers’ recognition luncheon at the British Colonial Hilton on Friday.
He said if Bahamians are to maintain the standard of living they are accustomed to, then they must ensure that they are extremely productive to compensate for the decreased time they spend on the job.
Mr. Francis also predicted that a U.S. led war with Iraq would impact the country’s tourism sector to the tune of 15 to 20 percent.
He said the fragility of the economic situation in the United States means that the Bahamian economy will continue to experience at best, sluggish conditions during 2003, which could be exacerbated by a war.
“The general outlook for the Bahamas’ economy for 2003 would be highly dependent on the general health of the North American economy and the potential impact of a war in the Middle East,” he said.
“The Bahamas can at best, expect very modest growth in economic recovery.”
According to Mr. Francis, the economy did not experience any growth at all in 2002. Financial analysts have estimated that the economic performance was flat in 2002, even though there has been very significant repositioning in the tourism sector.
“You have to be extremely optimistic to think that we are going to be able to experience any significant growth in the Bahamas during this year. If the war does in fact come about, there will be significant impact on our economy,” Mr. Francis said.
While some of the signs in the U.S economy are positive today, many experts do not see full-blown recovery during this year, while some feel that a the recovery could begin to emerge during the second half of 2003.
The prospect of war in the Middle East has introduced a great deal of uncertainty with regards to these outlooks.
Unemployment in the United States is back to an eight year high. And when one considers the impact of a number of difficulties which have been experienced within the U.S. markets over the last year – a string of accounting frauds and scandals and the tragic events of September 11 – one is justified in having a rather guarded view as to what the outlook is in that economy for that year, according to the Central Bank Governor.
Mr. Francis said small businesses will be the first to be affected by a further economic downturn and he added that there will be some degree of layoffs in the large tourism establishments. From there, he said, Bahamians will begin to feel a ripple effect throughout the economy.
He added that the combination of the very slow economic situation in the United States during 2001, resulted in the Central Bank of the Bahamas adopting a rather conservative position with respect to the developments in the country’s monetary sector.
Since September 2001 – a week before the terrorism attacks on the United States – banking institutions have been limited in the amount of loans they are able extend to the public.
That lending constraint continues to be in place. As of September 5, 2001, the loan portfolios and the banks’ existing commitments were capped at the number which they had on their books at that time. They have not been permitted to exceed that level since then.
This position is monitored on a monthly basis by the Central Bank, but for the meantime, the bank has continued to maintain the limited loan restriction.
By Rogan M. Smith, The Bahama Journal
