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IMF projects 1.75% growth in 2017, 2.5% in 2018

Performance driven in part by strong U.S. economy, phased opening of Baha Mar, related construction activity
Senior Business Reporter

Published: Sep 18, 2017

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The Executive Board of the International Monetary Fund (IMF) projected in its Article IV consultation with The Bahamas that this country's real GDP (gross domestic product) growth will pick up to 1.75 percent in 2017 and to 2.5 percent in 2018, driven in part by a strong U.S. economy, the phased opening of Baha Mar and related construction activity.

The IMF added that post-hurricane reconstruction following Hurricane Matthew last year and an uptick in foreign direct investment-financed projects, should also support The Bahamas' economic recovery. "However, medium-term growth would remain low, reflecting significant structural bottlenecks," the IMF executive board's opinion stated.

"Economic activity remained weak in 2016. Hurricane Matthew, which hit The Bahamas in October last year, significantly impacted tourism activity in 2016 and early 2017. However, completion of the mega-resort, Baha Mar, and post-hurricane reconstruction activity provided a boost to job creation, with the unemployment rate declining to 9.9 percent in May 2017 (down from 11.6 percent in November 2016).

"The opening of Baha Mar in April increased employment further by creating 2,000 new jobs in the three months to July. Inflation remains low and stable.

"Executive directors welcomed the expected pick-up in near‑term growth, driven by a stronger U.S. economy and the phased opening of Baha Mar.

"However, they noted that the economy continues to face significant challenges, including from structural bottlenecks and rising public debt."

The IMF directors, however, were receptive to the government's promise of, and strong commitment to, fiscal discipline.

"Continued strong fiscal consolidation and monetary and financial sector policies, as well as deeper structural reforms are necessary to generate stronger growth, improve competitiveness, tackle unemployment and enhance resilience to natural disasters," the directors' consultation statement said.

The IMF, in the statement, "expressed solidarity" with The Bahamas and other countries that are grappling with the impacts of Hurricane Irma.

The IMF also warned against the Bank of The Bahamas (BOB) debacle getting out of hand. The IMF underscored that "finding a permanent solution for Bank of The Bahamas is necessary to reduce fiscal contingencies".

The bank recently shed some bad loans from its portfolio in an effort to improve its position on paper. The bank sold $166 million of toxic loans to a special purpose vehicle that will attempt to liquidate the assets.

Meantime, IMF directors "called for a faster resolution of nonperforming loans to strengthen financial stability and support economic recovery".

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