Country Report Bermuda January 2010

Outlook for 2010-11

The premier, Ewart Brown, of the governing nationalist Progressive Labour Party (PLP), is due to stand down on completion of his four-year term as party leader in October 2010. The next general election is not due until 2013, giving a new leader an opportunity to recover the PLP's weak standing among the electorate. The PLP will continue to benefit from weakness in the opposition United Bermuda Party (UBP), which lost five members of parliament owing to defections in recent months. The government will struggle to honour its public spending commitments at a time of weak economic growth and revenue collection. Weaker import demand and falling profit remittances abroad will outweigh continued weakness in tourism receipts to maintain the balance of payments in surplus.

The political scene

Dissident UBP members have launched a new political force, the Bermuda Democratic Alliance (BDA). The party has attracted some popular support but will face a tough time differentiating itself from the traditional opposition. Violent crime continues to be a major concern and the government has announced a series of justice, youth training and education reforms with a strong focus on improving law and order.

Economic policy

Preliminary fiscal accounts for 2008/09 released in November showed a fiscal deficit of US$109m (2.6% of GDP) as the global economic crisis compressed revenue in the second half of the fiscal year. Opposition criticism of the government's fiscal management has focused on capital project cost overruns and a lack of transparency in the awarding of public contracts. For the second year in a row, general government accounts were given a qualified audit.

The domestic economy

Official GDP data for full-year 2008 released in December 2009 showed real GDP growth of 0.7%, a marked decline on 4.2% growth in 2007. Twelve-month consumer price inflation fell to a 35-year low of 0.2% in September 2009, down from a peak of 5.9% in September 2008. The number of visitor arrivals to Bermuda increased in the third quarter as a result of increased cruise ship arrivals. Stopover tourism declined, however. The government toughened its anti-money laundering and anti-terrorism regulations in November.

Foreign trade and payments

Official balance-of-payments data for the first half of 2009 show Bermuda's current-account surplus narrowed significantly in the second quarter of 2009, to US$266m (6.4% of estimated GDP), a 26.8% year-on-year decrease reflecting lower commodity prices and slack consumer demand for imported goods.

This report covers the following industry codes:
SIC Code: 49;70
NAICS Code: 22;72

• Summary
• Basic data
• Political structure
• Economic structure: Annual indicators
• Economic structure: Quarterly indicators
• Outlook for 2010-11: Domestic politics
• Outlook for 2010-11: International relations
• Outlook for 2010-11: Policy trends
• Outlook for 2010-11: Economic growth
• The political scene: Discontent with the premier has eased
• The political scene: A political third force sparks voter interest
• The political scene: Law and order will top the legislative agenda in 2010
• Economic policy: The fiscal deficit shows signs of widening further
• Economic policy: Capital project finances face harsh criticism
• Economic policy: Tighter financial regulation on international transactions
• The domestic economy: Growth fell to lowest level in a decade in 2008
• The domestic economy: Inflation dips to a 35-year low
• The domestic economy: Cruise tourism boosts visitor numbers but not earnings
• The domestic economy: Retail sales remain depressed
• Foreign trade and payments: Import spending remained weak in the first half