Tuesday, October 8, 2019
By YOURI KEMP
A FORMER Central Bank governor has welcomed the “optimistic” outlook from Standard & Poor’s prediction for the country’s post-Dorian rebound, but added the timing and quality of the government’s response will determine long-term impact.
Julian Francis told Tribune Business while S&P’s post-storm analysis is a “fair assessment”, the government has to follow through on the good news by executing a proper plan for economic recovery, particularly on Abaco.
“I think this is a fair assessment by S&P,” he told Tribune Business. “It is very difficult to determine a lot of things at this early stage. There is a lot of fact-finding going on: the extent of the cost of the infrastructure that the government will have to put in place in Abaco in the short-term particularly.
“As soon as the clean-up is substantially done, the government has to make clear what the plan is and if there would be any change the layout of the island of Abaco.”
He added: “Planning has to take place. Then there is going to begin the putting in place the infrastructure. It’s too early to know what that is going to cost. But the general tenor of the S&P position is fair.”
S&P, in a preliminary assessment, asserted that this nation is “well-positioned to handle the fall-out” from the category five storm.
The preliminary assessment, which suggested no further downgrade to The Bahamas’ sovereign credit rating is imminent, added that the hurricane’s long-term impact “could be limited” despite it devastating islands that account for between 15-20 percent of gross domestic product (GDP).
In response to that, Mr Francis said: “What I believe they are basing their position on largely is the fact that the government had been making significant improvement in the fiscal management of the country up to the last point in August. It is quite optimistic in that and the results of the government show this.
“We were already fairly optimistic for 2019. We were looking at GDP growth of two percent at least from other agencies, with S&P looking for at least 1.8 percent GDP growth for 2019.
“I think S&P is giving the government the benefit of the doubt here and have seen that the government has established that they are willing to make the hard decisions in order to do what it takes. So one can assume that they can focus on getting the job done post-Dorian.”
However he said the execution of this “depends on the timing and the quality of the response by the government.”
He added: “Particularly, how quickly the government can moblilise resources and how right they are in their mobilisation and response – they are the two main underpinning points.
“But it is too early to speak with any main certainty with anything right now. We can only be optimistic. But just for the sake of clarity we are talking mainly about the island of Abaco. East Grand Bahama is not as important to the overall economic engine of The Bahamas as is Abaco; and I’m talking mainly about East Grand Bahama alone and not Freeport. Even though in Freeport works need to be done clearly. I have not visited Freeport post Dorian, but from the reports I have gotten, it is probably not as severe or urgent as the problem we have in Abaco.
“The Abaco economy is not to be understated. It is a very important tourism economy and provides for a lot of other domestic industry. Abaco always holds its own. We would certainly lose some of that steam from Abaco, and with regard to whether or not the overall GDP growth rate would be mildly positive or mildly negative, depends on how good Abaco was and is moving forward.”
Mr Francis said while Dorian “would have wiped out the gains of 2019” he is willing to be persuaded and optimistic that S&P is right “that we would finish 2019 with a slight gain, or at least something better than zero or negative growth.”
When asked to respond to S&P’s comment that it could lower the rating if government finances deteriorate compared to medium term expectations and what does he estimate those expectations to be, Mr Francis said:
“They are primarily looking at the level of the debt and debt service ratio and looking at all of those numbers. When we consider what we had thought the medium-term outlook would have been, based on what we have now and would that now be not as good as we initially forecasted: Would those numbers be higher would the growth be overall slower.
“I am not 100 percent sure I would be in the negative column here either. As bad as it has been for us and as devastating as it has been, especially in Abaco, in a way it presents an opportunity to rebuild better than it was before, with the knowledge of how the Abaco economy has functioned and also for us to benefit from that knowledge on how we plan for the future.
“In case many are not aware, Abaconians are very industrious people. Yes it would be an additional burden placed on the Bahamas. It would not surprise me that within a few short years that we would turn this and make this success story.
“I think there is every possibility for that. I believe that the private sector is going to play a more important role than it would in any other island in The Bahamas. The Abaco private sector is going to be a strong partner with the government.”