Sluggish Growth Ahead In Bermuda In 2023

• Fitch forecast that real GDP growth will drop to 2.3% in 2023 in Bermuda, which is down from the previous forecast of 2.8% growth for the year, and down from an estimated 3.0% in 2022.
• Although the tourism sector will be the main growth driver in 2023 after restrictions on arrivals were largely removed in 2022, slowing rates of GDP growth will reflect the impact of base effects, inflation eroding real household incomes and headwinds facing the global financial services sector.
• Recently released data from the Government of Bermuda Department of Statistics showed that real GDP growth came in at 2.4% y-o-y in Q422. This was up from a 2.9% contraction in the previous quarter.
• Growth was mainly driven by a 4.5% y-o-y increase in private consumption, as the labour market benefited from improvements in the tourism sector and the absence of any domestic restrictions to contain the Covid-19 pandemic.
• Net exports and services rose by 5.1% in Q422, owing to recovering receipts from the tourism sector after post-arrival testing requirements for vaccinated travellers were dropped from April 2022 onwards.
• Nonetheless, Fitch sees real GDP growth slowing further to 2.0% in 2024, as further improvements to the tourism sector are offset by longer-term structural impediments to growth, though expecting inflation to slow to 2.8% in 2024 (4.5% projected for 2023) as global commodity price pressures ease.

(Source: Fitch Solutions)