IDB: Baha Mar to up jobless rate 2%

The Bahamas’ unemployment rate will jump by as much as two percentage points due to the 2,000 Baha Mar lay-offs, the Inter-American Development Bank (IDB) is predicting, virtually eliminating the May 2015 decrease.

The bank, in its latest Caribbean quarterly bulletin, said the Bahamas was “struggling to regain its footing” following the Baha Mar impasse, with the national debt now standing at a high 74 per cent of gross domestic product (GDP).

And, while the official unemployment rate had dropped from 15.7 per cent in November 2014 to 12 per cent in May, the IDB warned this trend will likely be short-lived when the November jobs figures are eventually released by the Department of Statistics.

It added that apart from Baha Mar hirings, gains which will now be reversed, the May unemployment rate decline was aided by temporary hirings related to Bahamas Junkanoo Carnival and sporting events (the IAAF World Relays etc).

“The May 2015 release of the Labour Force and Household Income survey indicated a decline in the unemployment rate to 12 per cent from 15.7 per cent in November 2014,” the IDB said.

“However, the drop reflects mostly temporary hiring for cultural and sporting events during the first half of the year. The Baha Mar Chapter 11 filing, however, has resulted in workforce reductions of approximately 2,000 employees, with an additional 400 lay-offs pending (total staff stood at 2,500). These lay-offs are likely to add an estimated 1–2 per cent to unemployment figures.”

Should the IDB’s estimates come true, the May unemployment decline will be almost totally reversed.

It is unclear whether Baha Mar’s remaining 350 staff, who have been retained to preserve the property and its assets, will also be let go and join their previously-terminated 2,000 former colleagues.

However, there can be little disputing the IDB’s assessment concerning the Bahamas’ economic stupor, and the further blow to jobs, confidence and growth that has been dealt by the Baha Mar debacle.

“Economic activity in the Bahamian economy remains mild as the country struggles to regain footing after the recent fallout from the $3.5 billion Baha Mar hotel, resort, and casino development,”the IDB said.

“The investment was expected to account for roughly 12–15 per cent of GDP over the next five years, but once Baha Mar is fully operational, visitor expenditure is expected to increase by about 7–8 per cent.

“Total investment is expected to rise by 3.3 per cent over the next few years.”

The IDB also agreed with the Central Bank of the Bahamas’ figures for this nation’s total national debt, which currently exceeds the IMF’s so-called 70 per cent ‘danger threshold’ - above which nations can lose sovereign control over their economic affairs, as they fall into a ‘debt spiral’ of borrowing to cover existing interest payments.

Debt levels, by March 2015, remained high but steady, at 65 per cent for central government debt and 74 per cent for total debt,” the IDB said, the latter figure matching that given by the Central Bank for the 2014 year-end.

The bank then called for the Christie administration to undertake “a more expansive debt management strategy that clearly identifies the mix of foreign versus local debt, and clearly schedules debt service payments, amortisation and refinancing”.

The IDB said the Government had traditionally kept foreign currency borrowings low as a percentage of its total debt, keeping the latter at less than $400 million - out of a total $3 billion - prior to the 2008 financial crisis.

“This profile has changed drastically over the last six years, with current central government debt exceeding $5 billion and external debt exceeding US$1 billion,” the IDB said.

“The change in the balance of domestic versus external borrowing reflects international developments. With lower interest rates in the international markets, local officials have seized the opportunity to take on more foreign currency debt and accumulate US dollars. Given the Bahamian economy’s reliance on imports, the US debt allowed for accumulation of foreign currency stocks.”

The IDB said the Bahamas had followed other countries in this move, adding: “This is a sharp change in strategy, which has been concentrated on international bond placements versus debt financing.

“Save for a $300 million placement in 2014, the Government of the Bahamas has not made any new bond issuances since 2009, shortly after the commencement of the global financial crisis.

“The diversification of the Bahamian portfolio has resulted in lower interest payments. Based on calculations of interest payments to average debt levels, the cost of international borrowing has been steadily declining in recent years, taking advantage of the lower interest rates in the US market. This strategy has been particularly important to the Bahamas, with a foreign currency debt largely comprised of US currency.”

Some 88.5 per cent of the Bahamas’ foreign currency debt is understood to be denominated in US dollars.

The IDB, though, noted that the Central Bank of the Bahamas had been criticised for not reducing its discount rate lower than the current 4.5 per cent, given the weak local economy.

Its last rate cut occurred in 2011, when the discount rate was dropped by 75 basis points from its then-5.25 per cent.

Comments

CommonSense says...

So, what's the truth here? On one hand you say the layoffs are pending and on the other hand you say it's unclear whether the retained persons will also be let go. Please clarify.
> "with an additional 400 lay-offs
> pending (total staff stood at 2,500).
>It is unclear whether Baha
> Mar’s remaining 350 staff, who have
> been retained to preserve the property
> and its assets, will also be let go
> and join their previously-terminated
> 2,000 former colleagues."

Posted 16 December 2015, 12:48 p.m. Suggest removal

sheeprunner12 says...

Don't worry ................ the PLP and Dept of Labour will cook the stats again like the May 2015 Carnival stats .................... this is just a nakedly crooked government

Posted 16 December 2015, 12:54 p.m. Suggest removal

Franklyn says...

Our leadership is so autocratic and the policies of the governing party is so party centrical that it’s no surprise that the county is spiralling down the economic ladder. The so called Public-private partnership initiative that Mr Christie so eloquently talked about 2 years ago has not produce any fruits, not because proposals were not put forward – but because the presenters were not perceived to be party supports.
Some of the proposal could create 100s of high paying jobs and some are called “very necessary” for the countries modernization process. But the offers has vanished in to the dust-bins of not interested or have found its way in to the hands of party supporters or front-men.
This is what is wrong with The Bahamas and it most stop. For to long the masses have being held down for the benefit of a privilege few. The Bahamas has great potentials and some of the brightest minds in comparison to other countries – but the mind-set of its leadership is (WLS) primitive.

Posted 16 December 2015, 7:32 p.m. Suggest removal

John says...

Doesn't it appear more and more obvious that if Perry Christie and his high powered (but ill- advised team of lawyers and politicians) did not meddle in the affairs of Bah Mar, very much to the detriment of the resort and Izmiriland, Bah Mar would be up and running today? As more and more information comes out, there was obviously major problems with The China Construction Company. Its performance at Bh Mar was lacking, quite seriously. So much so that Bah Mar saw the need to file for bankruptcy and further to get CCC off the property. Out of the picture completely They had the information, Bah Mar had. and they realized that CCC, apparently did not have any urgency in getting the project completed, or at least not in a timely manner, or not completing the work to an acceptable standard. They called it sabotage and even suspected conspiracy between the lender and the contractor. Izmiraland and his team were on site and in the trenches and had first hand knowledge of what was going on. So how do you think he felt when meddling Perry ignored him and, at least, appeared to strongly side fully with the Chinese, even to the point of kicking Izmiriland and his team to the curb and actively seeking a new buyer. Even to the point to flying teams of negotiators to China for discussions with the Chinese, even in the absence of Bah Mar representatives. Now the saga seems to have come full circle. China ExIm bank seems to want to distance itself from the China Construction Company and all the prospective buyers that were lined up to purchase the property seem to have dried up and disappeared. What would have been the scenario if Bah Mar would have been allowed to get the bankruptcy protection it sought and inject new money into the project and complete it. At least the property would have been completed and open by now, if not by now at least three months ago. Some Three Thousand Bahamians would be employed and having a jolly Christmas. The Bahamas would have the right to brag about the newest and largest resort in the Caribbean and something to cushion it against the opening of Cuba to the US tourist market. And even if Bah Mar was unsuccessful in operating the property and had to sell it some three or four years down the road, at least the property would have been completed, Prospective buyers would have seen the potential and it would be easier to market. The jobless rate would have been down by 5-7 percent rather than up by 2 percent. But no, the meddling and cocky PM, acting on misinformation, prevented all of this from coming to pass. THANK YOU PERRY, THANK YOU VERY MUCH!!

Posted 18 December 2015, 5:22 a.m. Suggest removal

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