Country Report Bahamas July 2009

Outlook for 2009-10

The Free National Movement (FNM) government, led by the prime minister, Hubert Ingraham, has a small but workable majority in parliament and is not expected to have difficulty enacting its legislative agenda during its term in office, which is scheduled to run until 2012. The Ingraham administration's success in the outlook period will depend upon its ability to balance the demands of combating the economic downturn with the need to maintain good relations with public-sector workers and local businesses, as well as managing the rising rate of unemployment. Controlling drug-trafficking and illegal immigration from Haiti will remain key to international relations with the US, the Bahamas' main trade partner. A sharp downturn in world economic conditions, and in particular a deep contraction in demand in the US, will constrain real GDP growth. Following a contraction of 1.5% in 2008, the Economist Intelligence Unit expects recessionary conditions to continue in 2009 before a gentle recovery begins in 2010, in line with a slow rebound in US economic performance. The government will continue its capital investment programme in the hope of stimulating future tourism investment. It will also explore the possibility of greater trade liberalisation in order to attract greater foreign investment, but in so doing will risk undermining relations with domestic companies.

The political scene

The opposition Progressive Liberal Party (PLP) remains weak, with uncertainty as to who will succeed Perry Christie as leader should he step down in the current parliamentary term, and ongoing scandals involving party members. The government is exploring the possibility of liberalising trade in services, which would go against the current protectionist policy.

Economic policy

The fiscal deficit for 2008/09 is estimated at US$352m (4.7% of GDP), almost double the budget projection. The government's fiscal projections for 2009/10 have been labelled as overly optimistic by the opposition and by the IMF.

The domestic economy

The key tourism and construction sectors continue to suffer, with tourist arrivals by air down by 15.5% year on year in January-April.

Foreign trade and payments

As a result of higher export revenue, the current-account deficit narrowed slightly in 2008, to 13.4% of GDP (from 18.5% of GDP in 2007).

This report covers the following industry codes:
SIC Code: 48;70;15
NAICS Code: 517;72;23