IMF Staff Appraisal on The Bahamas

• On January 19, 2024, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with The Bahamas and endorsed the staff appraisal without a meeting on a lapse-of-time basis.
• The Bahamas’ economy continues to rebound vigorously, driven by large tourism inflows. Real GDP growth is estimated to have reached 4.3% in 2023 (from 14.4% in 2022), while the unemployment rate fell below 9%.
• Inflation has been on a downward path since mid-2022. Backed by a strong recovery of tourism, the current account deficit is projected to have narrowed to 6.2% of GDP in 2023 (from 8.2% in 2022).
• Furthermore, the report noted that a strong cyclical recovery in revenues and a wind-down of pandemic-related spending improved the fiscal balance of the Bahamas. The fiscal deficit narrowed to 3.9% of GDP in 2022/23, while central government debt fell to 84% of GDP. Under current policies, the IMF staff projects a deficit of 2.6% of GDP in 2023/24 with debt falling to 78% of GDP by 2027/28.
• The economic outlook is favourable, albeit with downside risks. Tourist arrivals and real average spending, which surpassed pre-pandemic levels in 2023, should continue to rise in the near term, boosting real GDP and helping to narrow external and fiscal imbalances. Risks to the outlook include an economic slowdown in tourism source markets and the potential for costly natural disasters. Furthermore, raising potential growth beyond 1.5% is conditional on addressing bottlenecks in the energy sector and labour markets.
• That said, building fiscal buffers and investing in renewable energy infrastructure will help address downside risks stemming from natural disasters, global economic uncertainty, and climate change.

(Source: International Monetary Fund)