Thursday, October 11, 2018
By NEIL HARTNELL
Tribune Business Editor
Business confidence is growing because the Free National Movement (FNM) is viewed as "better managers of the economy and the Government's finances", a Cabinet minister said yesterday.
Dionisio D'Aguilar, minister of tourism and aviation, told Tribune Business that such perceptions had helped to minimise the value-added tax (VAT) hike's impact while also dissuading the International Monetary Fund (IMF) from making major cuts to The Bahamas' short-term growth forecasts.
He added that large Bahamian companies had told him "business is good", and there was an increasing willingness to invest in the Bahamian economy due to the Government's efforts to tackle the fiscal crisis and rein in public spending.
In remarks that are sure to infuriate the Progressive Liberal Party (PLP), Mr D'Aguilar said: "I think the perception is that the FNM are better managers of the economy.
"We're a bit more prudent, a bit more wiser, more fiscally responsible. We're managing the economy better, managing the public finances better, and are much more focused on the rudiments of running the economy.
"Every government upsets everybody about something, but when you step back and assess the management of the economy we're the ones talking about Fiscal Responsibility legislation," the Minister continued.
"At least it gives you confidence that we are not going back to where we were prior to the general election, when people were feeling there was so much irresponsible spending going on that they were afraid the economy was going into a tailspin and the possibility of suffering a devaluation was getting higher."
Mr D'Aguilar's comments are likely to reignite the "war of words" between the two major political parties over who has been the better steward of the Bahamian economy and government finances, with both sides able to seize on the other's failures.
The Christie administration added $2.2bn to the national debt despite enjoying the benefit of more than $1bn in new VAT revenues during its final two-and-a-half years in office, following the $1.5bn created by the last Ingraham administration.
While the Minnis administration has focused on improving government accountability and transparency, and eliminating the Government's $300m-plus annual deficits with a combination of tax increases and legislative measures, critics can also point to mishaps such as the $5.5bn Oban Energies Heads of Agreement "signing".
Mr D'Aguilar, though, pointed to the Fiscal Responsibility Bill recently passed by the House of Assembly as evidence of the Government's commitment to place the public finances on a more sustainable path - a move that will foster private sector confidence and room for its future growth.
"With the introduction of Fiscal Responsibility legislation, the real focus on controlling spending, people feel the public finances are being better managed, and we are in a better place than we were," the Minister told Tribune Business.
"Confidence is growing steadily in the economy, and where Bahamian purses were shut and they were not interested in investing in the domestic economy, people are feeling a bit more confident that the country is in a better place financially. They are more minded to invest in the economy."
Mr D'Aguilar said this was helping to counter the negative fall-out from the Budget's VAT rate increase to 12 percent, and the subsequent impact on disposable income and consumer spending.
"The increase in VAT is probably having some drag, but it's being overcome by the US economy and confidence of Bahamians in their own economy," he told Tribune Business.
"In my unscientific poll of bigger businesses, they are saying, yes, business is good. The confidence level is growing. That's the main thing. A lot of what is driving the economy is confidence.
"The confidence among local business people is we're in a better place, feel more confident investing in my economy, and do not have to worry about the Government continuing on this path of irresponsible spending."
Business executives on Tuesday said they were "pleasantly surprised" that the IMF did not cut its 2018 and 2019 growth forecasts for The Bahamas by more, given the VAT rate increase and impact of global economic developments such as the US-China trade war.
The Fund cut its economic expansion prediction for this year from 2.5 percent to 2.3 percent, while reducing its 2019 estimate by just 0.1 percent - from 2.2 percent to a revised 2.1 percent.
With the revised national accounts data suggesting The Bahamas has a $10-$11bn economy, the IMF's estimates effectively slash economic growth by $20-$22m this year and $10-$11m for 2019. This, though, does not alter the Fund's prediction that this country will enjoy the most rapid GDP expansion it has seen for a decade over these two years.
Mr D'Aguilar said the IMF and credit rating agencies had seen the Government was "now making good faith efforts to balance the books and get the Government finances under control".
He conceded, though, that the Government still had to address structural obstacles and bottlenecks that were "a major drag on the economy", such as the persistently high level of non-performing loans in the Bahamian commercial banking system.
"We're by no means out of the woods, but at least we're heading in the right direction," Mr D'Aguilar told Tribune Business. He added that The Bahamas' economy was demonstrating "a certain amount of resilience, a certain amount of strength" because it was feeding of US growth and low unemployment.