By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas will boost its long-term economic output by over $1bn if it starts investing in climate-resilient infrastructure and protecting natural assets such as beaches and mangroves, the IMF is urging.

The Washington D.C. based Fund, in a paper on climate change risks facing this nation, argued that heavy spending on mitigation and adaptation measures now could reverse what is forecast to be an up to 11 percent decline in Bahamian gross domestic product (GDP) by 2100 if no action is taken.

Investing in climate-resilient airports, roads, schools and hospitals, as well as seawalls, artificial reefs and other flood and storm surge barriers, will help increase annual Bahamian economic output by between 5.5-6.8 percent “once physical assets are secured”, the IMF projected.

And, to guard against the threat posed to a low-lying archipelago by sea level rise as a result of global warming, the Fund added that investment in dune restoration, reefs and breakwaters could cut projected GDP losses by between 57 percent and 46.5 percent in percentage terms. This, it projected, would slash the fall in economic output to just 1-2-2.3 percent as opposed to between 2.8-4.3 percent.

When combined, the IMF said the increased output from climate-resilient infrastructure coupled with reduced losses from protection against sea level rise will raise The Bahamas’ long-term GDP by close to 9 percent. With 1 percent of GDP estimated as being $146m, such a boost is equivalent to a $1.314bn economic impact for The Bahamas.

“The threat of climate change is here to stay. IMF analysis suggests that rising sea levels could place up to 41 percent of the land in The Bahamas, and 22 percent of its population, below sea level by the end of this century,” IMF economists Zamid Aligishiev, Beatriz Garcia-Nunes and Shane Lowe wrote yesterday. 

“Moreover, the country is positioned within the Atlantic hurricane belt, leaving it at high risk of hurricane damage. Left unaddressed, more severe natural disasters and slow-moving impacts from climate change could reduce The Bahamas’ national output by up to 11 percent by 2100, with larger losses in the islands whose economies rely most on hospitality and real estate.

“Given these risks, investing in The Bahamas’ capacity to adapt to climate change and preserve its natural capital could increase national output by up to 9 percent over the long-term, including through sustainable tourism,” they added.

“Building resilience to climate change would require diversifying away from vulnerable activities as well as undertaking investments to protect physical assets and natural capital - for example, breakwater construction, coral reef and mangrove protection, and beach nourishment programmes. Investing in climate resilience can be expensive, with financing needs exceeding those of the energy transformation.”

The trio were drawing on findings contained in a report accompanying the full 2024 Article IV assessment of the Bahamian economy, which found: “Over the long-term, sea level rise and natural hazards expose The Bahamas to severe losses in potential output in the ‘no adaptation’ scenario. The effects of sequences of disaster shocks accumulate over time, weighing permanently on macroeconomic outcomes.

“Staff estimates indicate that the prevailing natural disaster profile reduces current potential output by about 8 percent... without tropical storms. These losses are projected to rise under severe global warming scenarios.

“By 2100, combined with losses from permanent inundation, the additional potential output losses could be between 8.3 percent of GDP under intermediate greenhouse gas emission scenarios and 11.1 percent of GDP under a severe global warming scenario.”

The Bahamas’ largest employers and foreign currency export earner, tourism, was not surprisingly described as “particularly vulnerable due to its heavy reliance on natural capital, like sandy beaches, coral reefs, as well as arable land and fish stocks”.

The IMF added: “Investing in protecting physical assets partially offsets the impact of climate change on growth, but traded output losses remain sizeable. Structural resilience typically involves making public infrastructure, like roads, bridges, airport runways and schools, climate-proof, effectively representing a shift from standard to resilient capital.

“These efforts also encompass building protective infrastructure, like seawalls, artificial reefs and flood barriers, or strategically relocating vulnerable assets to safer zones. Public investment in adaptation yields a long-term increase in the level of GDP of around 5.5-6.8 percent once physical assets are secured.

“However, sea level rise undermines growth in the traded sector since the natural capital remains vulnerable. While the tourism sector benefits from preserving a larger average stock of physical capital, the growth dividends are limited due to the complementarities between physical and natural capital, meaning the output gains from protection are smaller if natural capital is not explicitly included in adaptation strategies.”

The Fund added: “Implementing adaptation measures aimed specifically to reduce exposure of natural capital could reduce long-run traded output losses and ease pressures on future export and fiscal revenues.

“Beach nourishment, such as dune restoration, along with resilient infrastructure like artificial reefs and breakwaters, can limit coastal erosion in key tourist areas by directly offsetting sediment loss and promoting natural sediment accumulation.

“These measures would help The Bahamas to avoid costs associated with relocating tourism-related physical assets and reduce potential output losses further, from 2.8-4.3 percent to 1.2-2.3 percent of GDP and supporting fiscal and export revenues. A comprehensive resilience building strategy could also help stabilise output during climate shocks, potentially reducing uncertainty in fiscal and foreign exchange income.”

Besides its exposure to more powerful and frequent hurricanes, the IMF said some 80 percent of The Bahamas’ land mass sits 1.5 metres or less above sea level. Hurricane Dorian’s economic loss and damage totalled $3.4bn, equal to around 25 percent of the Bahamian economy’s total output.

“Over the past decade, natural disasters have averaged 3.2 percent of GDP in annual damages,” the Fund added. “Climate-related disasters, such as floods, droughts, and hurricanes, are becoming more frequent and severe due to rising global temperatures and sea levels.”

Amid forecasts that hurricane-related damages in The Bahamas will increase by 31 percent under 3°C warming, and by 42 percent under 4.3°C, the IMF said sea level rise and warming are threatening storm surge barriers such as mangroves and coral reefs. “As these ecosystems degrade, they lose their ability to buffer against increasingly intense hurricanes, potentially leading to amplified hurricane damages,” it added.

“Sea levels are projected to rise by nearly 0.5 metres by the end of the century, even with strong international efforts to keep global temperatures in line with the Paris Agreement goal. Given The Bahamas’ naturally low elevation, this would place about 41 percent of the land and 22 percent of the population below sea level, likely putting private assets and public infrastructure at risk.

“Rising sea levels and intensified storm surges could further strain already scarce freshwater resources, posing significant challenges to agricultural productivity. Meanwhile, rising sea surface temperatures and water acidification could diminish available marine fish stocks, impacting oceanic biodiversity and food security.”

The IMF continued: “The Bahamas, with nearly half of the Caribbean’s sandy beaches and vital coral reefs and mangroves, faces significant risk. Without adaptation measures, a 0.5 metre sea level rise could cause the complete loss of up to half of sandy beaches located near hotel infrastructure.

“In addition, the inundation of mangroves and the bleaching and degradation of coral reefs would lead to a loss of biodiversity, further reducing the country’s attractiveness to tourists over time. This combination of factors could lead to a gradual decline in tourist inflows if adaptation strategies are not implemented.

“The impact of sea level rise across The Bahamas is expected to be substantial,” the Fund added. “However, the degree of vulnerability will differ across islands. Islands where hospitality and real estate form a larger part of the economy are anticipated to suffer greater land loss, making them not only more exposed to rising sea levels but also more economically sensitive.

“While these islands - Exuma, Andros, Cat Island, and other smaller Family Islands - contribute only 5.1 percent of national income and 7 percent of the population, they may experience disproportionately higher income losses. These islands are also likely to have a lower capacity to adapt to climate change compared to more developed islands like New Providence and Grand Bahama.”