Dire Short-Term Economic Outlook For Bahamas After Hurricane Dorian

  • Initial media reports out of the Bahamas indicate that the country’s infrastructure has been severely damaged by the storm, particularly in the northern islands of Grand Bahama and Abaco.
  • While it is too early at this point to update the real GDP growth forecasts for the Bahamas, the data from other countries in the wake of hurricanes Irma and Maria in 2017 suggest that the Bahamian economy is likely to contract significantly in 2019 due to disruptions to business activity particularly given damage to tourism infrastructure. This would be a significant revision from Fitch’s pre-storm forecast of 2.3% y-o-y real GDP growth for the Bahamas this year.
  • The storm will also impact the political agenda in the Bahamas in the coming quarters. Minnis’ Free National Movement (FNM) government will likely shift its focus from implementing fiscal consolidation measures and passing economic liberalization policies to ramping up government spending to support activity after the hurricane.
  • Moving forward, it is expected that the Bahamas will see a ‘V-shaped’ recovery, in line with those of other Caribbean economies affected by hurricane damage, with real GDP growth spiking sharply in the quarters following the storm due to reconstruction efforts and base effects. However, this outcome is contingent on the Bahamas receiving access to aid in the wake of the storm, given the country’s limited domestic financial resources.

(Source: Fitch)