Bahamas Braces For Higher Inflation As Growth Trimmed To 5%

  • The Central Bank’s governor yesterday trimmed the Bahamian economic growth forecast for 2022 “to at least 5%” from 6% while warning that the cost-of-living crisis facing many families has yet “to peak”.
  • John Rolle, speaking as the regulator unveiled its half-yearly economic and financial update, said Bahamians should expect to see higher US inflation rates, which are running at 40-year record highs and hit 9.1% last month, increasingly reflected in the price of goods and services sold locally.
  • While official measures place Bahamian inflation below 5% (the Central Bank’s report pegged it at 3.8% for the year to April 2022), the country’s dependence on US imports – and inability to influence prices itself - means consumers should brace for further increases.
  • According to Mr Rolle, while Bahamian inflation has "not yet reached the same level indicated in the US," the average inflation rate in The Bahamas will continue to move a bit higher in the near term.
  • One counter to inflation, and where the country has seen some “head off” has been on electricity (energy) costs that have been somewhat contained via the fuel hedging initiatives employed by Bahamas Power & Light (BPL) and Grand Bahama Power Company.
  • It is unclear, though, how long BPL will be able to hold fuel costs at their current level given the ongoing doubts about the status of its fuel hedging initiative and whether the Government is subsidising the utility’s fuel costs - something it is supposed to be blocked from doing by law under regulations passed in 2020.
  • Low-income Bahamians, especially, but also those in the middle class as well as on fixed incomes such as pensioners, have been hit hard by food and gas price increases in the wake of COVID-19. Wages have largely remained stagnant, which has resulted in living standards for many eroding while the cost of living remains high.
  • As for the overall economic outlook, the Central Bank governor indicated that despite the slight revision downwards the economy is projected to grow at a healthy pace of at least 5% in 2022, and gains are also expected in 2023, continuing to reflect a bounce back from COVID-19.

(Source: The Tribune)