Press Release: IMF Staff Completes Visit to the Bahamas

An International Monetary Fund (IMF) mission led by Jarkko Turunen visited the Bahamas from December 7-11, 2015, to review economic developments in advance of discussions for the 2016 Article IV consultations (expected to take place in March 2016). At the conclusion of the mission Mr. Turunen issued the following statement:

“GDP growth remains modest, projected to have been around 1 percent in 2015 and, following the further delay in opening of the Baha Mar resort growth is now projected to rise only to 1.5 percent in 2016. While there is significant uncertainty about the timing of the project’s completion, Baha Mar’s opening is likely to provide an additional boost to growth. Unemployment is high and inflation moderate (at 1.6 percent in August), with the temporary increase from VAT introduction tempered by the impact of lower energy prices. Gross international reserves remain low, at US$774 million (end-October), equivalent to about 2.2 months of imports of goods and services. The large share of non-performing loans (15 percent of total loans at end-October) continues to constrain bank lending. Central government debt is estimated to have increased. However, the January 2015 introduction of a broad-based VAT, with a low standard rate and few exemptions, has contributed to fiscal consolidation. Reports of VAT implementation thus far are encouraging, with revenue exceeding expectations.

“Near term challenges stemming from the low growth environment underline the importance of implementing past policy recommendations. Specifically, the 2015 Article IV report recommended structural reforms to support strong and inclusive medium-term growth and competitiveness; rebuilding fiscal and external buffers; and policies to preserve financial sector stability. Continued fiscal consolidation, through steadfast implementation of the VAT with few exemptions and expenditure rationalization, together with public enterprise reform, remains critical to sustaining macroeconomic stability. Finalizing and implementing the National Development Plan and further progress in energy sector reform remain priorities.

“The mission met with the Honorable Michael Halkitis, Minister of State for Finance; Ms. Wendy Craigg, Governor of the Central Bank of The Bahamas, senior government officials and representatives of the private sector. The mission would like to thank the authorities and technical staff for their cooperation and hospitality.”