By KHRISNA RUSSELL

Tribune Chief Reporter

krussell@tribunemedia.net

WITH the new Omicron variant continuing to spread in neighbouring countries, Economic Affairs Minister Michael Halkitis said The Bahamas must remain vigilant and practice discipline to sustain the improving fiscal picture.

According to reports, the variant has been identified in at least 17 US states and the Centres for Disease Control and Prevention is predicting a likely increase of new infections.

“Signs are pointing to an improving economy and we are hopeful,” Senator Halkitis said in the upper chamber yesterday during debate on the 2021/2022 supplemental budget.

“We remain cautiously optimistic that we have seen the worst of the pandemic but we know that we must remain vigilant in our health precautions and disciplined in our fiscal management because as Omicron has shown us, we are not out of the woods as yet.

“Omicron has showed us that with its appearance and the reaction to it, and I smile, because the reaction has been very acute and possibly hysterical.

“But even in that hysterical reaction there are implications to the economy and so we must be careful. We’re not out of the woods.”

The minister said the government was also changing its fiscal targets to ensure improvement of stability to the fiscal house.

“The government is targeting potential real economic growth of at least three percent per year for the next five years, rather than the low growth rate previously experienced for decades of roughly 1.5 percent per year. This growth level would result in lower levels of unemployment and higher revenues for the government.

“The government plans to boost capital expenditure to 3.5 percent of GDP on an ongoing basis as one of the key initiatives to underpin and enhance the potential growth of economic activity. The government will prioritise both direct investment in public infrastructure and greater reliance on economically and fiscally sensible public-private partnerships.”

In addition officials are also forecasting an increase of recurrent revenue.

“The aforementioned fiscal targets are expected to positively affect the deficit over the medium term. Based on initial estimates for the remainder of the (fiscal year) 2021/22, recurrent revenue is expected to increase by $92m to $2,336.5m, due to increased immigration fee revenue, the proceeds of the real property tax amnesty and upticks in domestic activity ahead of original projections.

“Recurrent expenditure is expected to increase by $53.3m to $2,879.2m as compared to the original budget estimates given the reallocation across ministries and increases in hardship support and social benefit allocations and provision for settling arrears in back pay and gratuities as previously mentioned.

“Capital expenditure will fall by $54.2m to stand at $316.2m as PPPs and other forms of financing are pursued and budget provision for capital projects are aligned with the execution schedule.”

As a result, Mr Halkitis said the deficit is expected to improve to $858.9m for 2021/2022 compared with $951.8m in the original budget estimations.

In turn, the deficit as a percentage of GDP will decrease to 7.4 percent versus 8.2 percent as stated in the original estimates.