By Alison Lowe
Nassau Guardian Business Editor
NASSAU, Bahamas -- Preliminary figures have provided evidence of a significant economic slowdown in The Bahamas last year, showing that real growth in gross domestic product (GDP) missed earlier projections and fell to just under 0.7 percent in 2013, as household expenditure and imports dropped.
Releasing the latest data on the period 2011 to 2013, the Department of Statistics revealed that real GDP growth, while positive, has in fact declined throughout this period.
If correct, the 2013 figure also indicates that The Bahamas may have widely missed the mark on GDP growth projected by the International Monetary Fund (IMF) in 2013. In October of last year, the IMF estimated that The Bahamas would achieve a real GDP growth rate of 1.9 percent for the year.
Meanwhile, revising its preliminary real GDP growth rate for 2012, first released in April 2013, the department found that new data showed this had fallen from an initial estimate of 1.83 percent to a provisional figure of 1.03 percent. A revised real GDP growth rate of 1.06 percent was released for 2011.
In a separate Monthly Economic and Financial Developments report for the month of March, The Central Bank of The Bahamas said that the 0.7 percent preliminary real GDP growth figure for 2013 shows that the economic recovery in the country is “still very fragile”.
“This below-trend growth is expected to persist over the near-term, as the domestic environment continues to face significant headwinds due to the modest recovery in the global economy -- particularly in the key stopover markets for tourists.
“However, steady stimulus from foreign investment activity, alongside the pending completion of the mega resort project will provide improved opportunities for employment in the near-term, although counterbalanced by the recent announcements of retrenchments in the banking sector, which are poised to impact the middle income segment of the job market,” said a representative from the bank.
The Department of Statistics used the expenditure approach to GDP measurement, which takes into consideration government and household consumption combined with investment and exports, minus imports into the country, to produce its latest report on GDP growth.
Officials broke the rate into two forms: so-called ‘real’ GDP growth figures – the GDP at ‘constant prices’ -- which factors in the effect of inflation on GDP growth outcomes and which is considered a more useful figure for studying trends in economic growth, and GDP in ‘current prices’, which is based on current price levels and currency values and which measures the total value of products and services in a particular year. GDP growth at current prices was 2.5 percent in 2013.
In doing so, officials found that imports of goods and services overall fell by 5.9 percent in 2013 when measured in constant prices.
“The imports of goods, which usually represent 70 plus percent of all imports, dropped by 10 percent, led mainly by a significant decrease in import of mineral products, which fell by 17 percent based on the first three quarters of 2013. The imports of services at current prices increased by seven percent, led by construction services imported, which grew by 81 percent, partially balancing out the larger decreases in the goods imported,” stated the Department’s report.
Gross capital formation, the value of investment in buildings, machinery and infrastructure in the economy – a combination of the value of materials and labor used to produced the various projects – fell in constant prices by 1.8 percent last year.
“This decrease was attributed mainly to a drop in residential construction (8.6 percent), which was estimated based on declines in the Central Bank’s ‘residential mortgage commitment’ category for new construction. The number of these commitments fell by 13.9 percent and the value by 7.2 percent, based on the first three quarters of 2013. The ‘other construction’ category also decreased by 10 percent, as the result of the winding down of major construction projects, such as the Airport Development Project and the New Providence Road Project.
“The ‘machinery and transport equipment’ category also had a decline of 10 percent, based on the imports of goods in the first three quarters of 2013. The ‘non-residential construction’ continued to show a growth of 21 percent, led by the increase in the construction services imported,” said the report.
Turning to exports, officials noted that these also registered a decline in 2013.
The report continued: “The exports of goods and services at constant prices in 2012 fell by 4.2 percent and in current prices (by) 5.4 percent. This drop is the result of a 12.6 percent decrease in the export of goods based on the change in the first two quarters of 2013.
“Tourism expenditure at current prices also decreased by an estimated three percent as a result of a reduction in the number of stopover arrivals to The Bahamas in 2013.”
Total ‘private final consumption expenditure’, also called ‘household expenditure’, declined in constant prices by 0.3 percent. Such expenditure represents 70 percent of GDP, noted the department. A slight increase would have been recorded were it not for inflation.
Conversely, overall government expenditure, which is split for statistical accounting purposes between “individual consumption” and “collective consumption”, rose.
Individual consumption, which includes health and education services, grew by 1.5 percent at constant prices, while collective consumption, which represents the remaining services paid for by government, experienced a five percent rise, according to officials at the Department.
Republished with permission of the Nassau Guardian