By NEIL HARTNELL

and FAY SIMMONS

Tribune Business Reporters

The Central Bank’s governor yesterday said the Bahamian economy can still grow in 2025 amid Trump tariff uncertainty as the pace of expansion for the country’s foreign currency reserves fell almost 69 percent.

John Rolle said there are a “range of possibilities” for the country’s 2025 economic performance as data revealed that much of the decline in the country’s external reserve growth rate year-over-year during the 2025 first quarter was due to a $120m drawdown by the “public sector” - meaning the Government.

“Turning to foreign exchange indicators, net inflows decreased during the first quarter of 2025 owing to reduced contributions from both the private and public sectors. In particular, commercial banks’ total purchases of foreign currency from the private sector were approximately unchanged during the first quarter, underscoring comparatively subdued growth in economic activity within the sector.” Mr Rolle said.

“However, given stronger private sector credit expansion, gross foreign currency sales - which mostly signal expenditures on imports of goods and services - was 2.4 percent higher. As a result, commercial banks’ net foreign currency sales to the Central Bank contracted by approximately 10 percent.

“This outcome, along with a net sale of foreign currency by the Central Bank to the public sector, as opposed to a sizeable net purchase of foreign currency borrowing proceeds in 2024, resulted in a two-third reduction in the seasonal growth in reserves during the first quarter of 2025.”

Notes to Mr Rolle’s speech added: “Compared to 2024 when the public sector made net foreign currency sales to the Central Bank of $214m, the sector made a net purchase from the Central Bank of approximately $120m in 2025.” The Central Bank, in documents accompanying yesterday’s meeting, said the $120m drawdown by the Government was due to a “net debt repayment”.

And the Governor added: “External reserves grew by $171m over the first quarter of 2025, and as at the end of April were approaching $2.8bn, moderately less than the estimated $2.9bn at this point last year. Over the remainder of 2025, the private sector is expected to make a net drawdown on the reserves due to an expected strengthening in private sector credit growth.

“The Central Bank is supportive of this outcome, as the reserves are still healthy overall, and expected to remain more than adequate to back the value of the Bahamian dollar against the US currency. In addition, the elevated liquidity in domestic banks continues to be ample to accommodate stronger lending.”

Elsewhere, higher-spending stopover tourist arrivals were reported to be down 3.9 percent year-over-year at 300,000 for the first two months of 2025. “With regard to tourism, the constrained hotel sector capacity underpinned slower quarterly earnings potential than in 2024,” Mr Rolle said.

“In the latest available data, total air arrivals to The Bahamas contracted, based on both the overall indicators through February and estimated departures through the Lynden Pindling International Airport (LPIA) through March.

“Reduced air traffic is estimated to have impeded hotel sector performance most, while vacation rental sales, an important segment of the stopover market, further expanded, also attracting incrementally appreciated average daily rental rates. The cruise industry maintained healthy growth, with capacity continuing to expand, given ongoing investments in onshore destinations throughout the country.”

Still, Mr Rolle said there is potential for The Bahamas to welcome more visitors due to a diversion of economic activity away from the US. Yet there is also the chance that economic conditions in the US get so extreme that The Bahamas’ economic growth decreases.

“One has to appreciate that, at this point, at the end of April, we are in the peak of the tourism season. So some of the adjustments as regards what’s going on in the US, whether how it’s impacting tourism, we’re going to be experiencing that whether it’s a positive or a negative over the first half of the year and into the early part of the summer,” said Mr Rolle.

“I anticipate that the range of possibility for The Bahamas is that we could see the outcome, growth wise this year, in line with what we initially expected, or we can see it above that if there is a favourable diversion of economic activity requirements.

“Or, if the uncertainties in the United States get more extreme, you could see the growth levels being much lower than originally forecasted, but there’s still an overall expectation that the economy will grow this year. So there’s no negative forecast at this point, but these are forecasts that’s important to understand.”

Mr Rolle said that although the IMF projected Bahamian economic growth of 1.8 percent, this is below the 2 percent the country should be aiming for to make a “significant impact” on its unemployment rate.

“I think what’s most important about the growth forecast is we’re below 2 percent, and generally it’s accepted that The Bahamas should be aiming for above 2 percent to make the sort of more significant impact in terms of where the unemployment rate settles,” said Mr Rolle.

“Turning to the outlook, the downside risks facing the economy have increased, particularly in light of the tariffs imposed by the US and uncertainty over how trade policy tensions between the US and its major trading partners will be resolved.

“With the IMF’s outlook for the US and the global economy, consequently downgraded but positive, The Bahamas could also experience slowing from weakened US consumer confidence and its potential pass-through to lower travel demand,” he added.

“In addition, the inflation outlook is potentially elevated, as higher costs on goods imported into the US would be expected to have some pass-through to increased costs on goods and services that The Bahamas sources from the US. The risk of increased costs could also mount from supply chain disruptions, potentially from diverted or impeded trade flows.”