Bahamas’ Private Sector Credit Shrank 20% Pts Of GDP Pre-COVID

• The Bahamas’ low pre-COVID economic growth coincided with bank credit to the private sector contracting by the equivalent of 20 percentage points of GDP.
• Moody’s, in its full annual report on The Bahamas sovereign, said; “Credit to the private sector has been on a long-term declining trend for years, with credit to the private sector falling to around 45% of GDP by year-end 2019 from around 65% in 2010, although this figure climbed back to 58% in 2020.”
• On the other hand, “The IMF attributes the contraction in credit to more stringent lending standards, a low-growth environment keeping demand for credit low and a conservative lending stance from banks.”
• Moody’s asserted that the country will face the same structural obstacles to growth that have remained unaddressed for decades. “The low growth rate reflects a variety of factors, including competitiveness issues, infrastructure constraints, household debt overhang resulting in low credit growth, chronically high unemployment and sluggish tourism.”
• Structural bottlenecks have prevented The Bahamas from diversifying its economy away from tourism (which comprised over 40% of GDP in 2019), and include issues related to global competitiveness and high energy costs. Infrastructure bottlenecks also limit growth.
• However, “The Government continues to pursue a number of initiatives to improve competitiveness, including the continued digitisation of public services and processes, as well as reforming the corporate insolvency regime to support improvements in the business environment,” the rating agency added.

(Source: The Tribune