By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas was yesterday urged to “take with a grain of salt” the International Monetary Fund’s (IMF) modest upward revisions to this nation’s projected economic growth for 2025 and 2026.

Gowon Bowe, Fidelity Bank (Bahamas) chief executive, told Tribune Business that this nation should not let its guard down over the Fund’s improved forecasts given the “real” threats poised to “come down the pipeline” from Donald Trump’s unpredictable tariff policy and the price increases this will cause.

He spoke out after the Fund, in unveiling its latest World Economic Outlook, actually increased its economic growth predictions for The Bahamas this year and next while, at the same time, slashing those for every major developed economy including the US.

Bahamian gross domestic product (GDP) growth was revised upwards by ten basis points, or 0.1 percentage points, for 2025 and 2026 when compared to both the IMF’s October 2024 World Economic Outlook and its Article IV report on this country that was released in January this year.

The Bahamas’ 2025 GDP growth has been revised upwards to 1.8 percent for 2025, as opposed to the previous 1.7 percent estimate, while that for 2026 has also been raised by the same margin - from 1.6 percent to 1.7 percent. The IMF provided no rationale or explanation for The Bahamas’ shift, which came as it warned of a “major negative shock” unleashed into the global economy from Mr Trump’s trade policies.

While the US president has suspended imposition of these so-called “reciprocal” tariffs on most countries, with the exception of China, for a 90-day period through to early July, the ongoing uncertainty continues to damage business, consumer and investor confidence. While stocks recovered modestly yesterday, trillions of dollars in value has been wiped off global stock markets, while the US dollar is at a near three-year low.

Given The Bahamas’ deep-rooted reliance on the US for the bulk of its tourists, goods imports and other long-standing commercial ties, as well as this nation’s well-known vulnerability to external shocks from both recessions and climate change, most observers would have forecast a downward - rather than upward revision - by the IMF to this nation’s GDP growth forecasts given all the negative forces in play.

Bahamian businessman Robert Myers yesterday described the IMF’s upward revisions as “bizarre” especially given the lack of explanation for the changes. And Mr Bowe reiterated that the slight ten basis point improvements, which are equivalent to around a $14m-$15m increase in GDP, pale into insignificance when compared to the consistent 3-5 percent real GDP growth needed to dent structural unemployment.

“I don’t think we over-emphasise a ten basis point shift,” the Fidelity Bank (Bahamas) chief told Tribune Business. “If we are looking wider, and at what we would like to see taking place, we certainly want to see a growth rate closer to 5 percent in nominal terms and, on a real basis, we’d like to see 3 percent.

“I think from that perspective, when we see a marginal shift, we take them for what they are but should not get distracted by directional movement.” Astute observers, Mr Bowe added, would be looking for “meaningful movement” in The Bahamas’ GDP growth projections, such as a half a percentage (0.5 percent) or 50 basis points shift similar to the downward change that occurred between 2023 and 2024.

Noting that yesterday’s upward revisions by the IMF fail to hit this mark, he added of the ten basis point improvements: “That’s not going to increase government tax revenues by any significant sum. That’s not going to provide unemployment contraction in any significant way, and the same IMF has indicated we need to consistently be at 5 percent growth in nominal terms to achieve that.”

With the IMF’s GDP growth revisions equal to around a $14m-$15m increase in Bahamian economic output, Mr Bowe estimated that around 20 percent of this would go to the Government in tax revenues. This would translate into just a $3m revenue increase at a time when the Government is targeting up to $4bn in total annual Budget revenues.

And, despite yesterday’s slight improvements, the IMF also signalled its belief that The Bahamas is returning to its historical annual economic growth average of less than 2 percent for the remainder of this decade with a projection of 1.5 percent expansion for 2030. That rate is half of what the Fund previously said is needed to absorb all new school leavers into the workforce while cutting existing unemployment by 50 percent.

Questioning whether the IMF’s revised Bahamas projections were done prior to the Trump tariff unveiling, the Fidelity chief executive said other US economic indicators are “not positive’. These include Mr Trump’s recent attacks on the Federal Reserve chairman, Jerome Powell, and hints that he may seek his removal, which is creating further “market volatility, and not good volatility”.

“From The Bahamas’ perspective, we have to watch very closely what is happening in the US,” Mr Bowe said. “I believe the US is doing, and I’m going to call it a crap shoot, where they’re rolling the dice and trying for  the best break.

“Depending on the length and outcome of the tariff struggle, the US economy could be in for significant inflation, and if there’s an interest rate to control it there could be a contraction. Our best hope is for a soft landing, but our hotels have indicated their bookings are less than they’d desire.

“We’re seeing warnings across the tourism industry, other than the cruise industry, which is the cheaper end of our business. That’s not where we want to see the growth coming from if we’re being very candid. We want to see the growth in stopovers.”

Summing up the IMF’s revised growth forecasts, Mr Bowe added: “It’s certainly no victory lap, and it’s one we take with a grain of salt and focus on things that are coming down the pipeline. Tariffs are there and real, price increases are there are real.”

And, while the Government has voiced interest in sourcing products from non-US markets, and developing supply chains outside the US, he questioned whether Bahamian consumers would accept the alternatives given how brand conscious many are.

The Bahamas’ upward GDP growth revisions came as the IMF slashed its forecast for global GDP expansion to 2.8 percent for 2025 - a forecast some 0.5 percentage points weaker than it was predicting as recently as January. US growth was projected to fall from 2.7 percent to 1.8 percent, while the UK’s forecast was slashed from 1.6 percent to 1.1 percent.

Meanwhile, inflation in The Bahamas was forecast by the IMF to remain moderate at 0.9 percent and 1.3 percent on an annual basis, respectively, for 2025 and 2026.