Bahamian Government To Support Economic Recovery In 2022, Then Pivot To Consolidation

 

• Fitch anticipates that Prime Minister Philip Davis will prioritise short-term spending measures to bolster the Bahamian national vaccination campaign, which has lagged behind other Caribbean markets. As of February 23, 38.8% of the Bahamian population had been fully vaccinated, and an additional 3.3% had been partially vaccinated. This is well below vaccination rates in the Dominican Republic and many other major tourist destinations in the Caribbean.  
• Additionally, Davis and the Progressive Liberal Party (PLP) will likely advance expansionary fiscal measures in the near term to support the economic recovery from the COVID-19 pandemic. However, In the longer term, the PLP government will likely shift fiscal policy towards consolidation due to wider deficits caused by the pandemic and a rising debt load.  
• Bahamas’ real GDP contracted 14.5% in 2020; however, Fitch forecasts that growth will accelerate to 10.9% in 2022, from an estimated 1.5% in 2021. These forecasts suggest that the Bahamian economy will not fully regain its 2019 level of output until 2024. Notably, Davis said his government will take measures to contain rising prices caused by global inflationary pressures, such as supporting domestic agricultural production. 
• The country’s fiscal deficit widened to 11.4% of GDP in 2020, then modestly narrowed to 10.3% in 2021. Consequently, Fitch expects that the PLP government will likely pursue debt renegotiations with the IMF and other international creditors, though the fiscal adjustment would not likely begin until the Bahamas is nearing its pre-pandemic level of output. 

 (Source: Fitch Solutions)