By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Cabinet minister yesterday asserted the Government is aiming “for even stronger growth” after the IMF upgraded The Bahamas’ economic expansion prospects by 0.4 percent for both 2025 and 2026.

Michael Halkitis, minister of economic affairs, replying to Tribune Business from Washington DC, where he is representing this nation at the International Monetary Fund (IMF) and World Bank meetings, said the improved forecasts are “encouraging” but the Davis administration is targeting more to both reduce unemployment and further strengthen the Government’s fiscal position.

Speaking after the IMF raised The Bahamas’ gross domestic product (GDP) growth prospects for this year and next by 40 basis points, from 1.8 percent to 2.2 percent for the 2025 full-year, and from 1.7 percent to 2.1 percent in 2026, he added: “We are encouraged by the upward revisions but our aim is for even stronger growth to support job creation and strengthening of the national finances.”

Asked how this “stronger growth” will be achieved, Mr Halkitis identified increased foreign direct investment (FDI) inflows, including bringing approved projects out of the pipeline to the start of construction, as well as ongoing infrastructure upgrades such as the improvements to Family Island airports, as key to the Government’s strategy.

“Continued roll-out of the infrastructure programme, particularly Family Island roads and airports, and stronger FDI inflows, including the beginning of construction on some existing properties in New Providence and Grand Bahama,” Mr Halkitis messaged.

The IMF provided no basis, or explanation, for why it has upgraded The Bahamas’ economic output and growth prospects for a second time in 2025. The move came even as the Fund itself asserted that the global outlook appears “dim” based on the continued protectionist threats and disruption from Donald Trump’s tariffs and wider economic policies.

Based on the GDP growth estimates contained in the Government’s 2025-2026 Budget, the upward revisions by the IMF are equal to a $60.4m increase in The Bahamas’ annual economic output for both 2025 and 2026. And the growth rates for both those years, at 2.2 percent and 2.1 percent respectively, are higher than the country’s forecast long-run average GDP expansion of 1.5-1.6 percent.

While the Fund is still predicting that The Bahamas will revert to that average over the medium-term, hitting 1.5 percent GDP growth for 2030, the revised short-term estimates will likely be seized upon by the Davis administration as evidence that its economic policies are having an impact as it prepares for both the upcoming Golden Isles by-election and a general election.

However, Gowon Bowe, Fidelity Bank (Bahamas) chief executive, told Tribune Business that while The Bahamas’ improved GDP growth forecast is positive it remains a prediction and “not an actual outcome”.

Warning against becoming “overly excited”, he pointed out that the IMF itself has previously estimated this nation’s economy needs to expand at double the projected GDP growth rates for 2025 and 2026 to make a “meaningful” dent in jobless numbers that were reported to have increased through the three quarters to end-March 2025.

“These are just projections,” Mr Bowe said of the IMF upgrades. “I think that it is one we should acknowledge as positive news and their view point but, more importantly, we need to be clear on what elements contributed to that projection.... The reality is: Are we doing everything to bring it to fruition?

“I think, if we put it in context, the growth rate necessary for a meaningful decrease in our unemployment numbers on a real growth basis is over 3 percent and closer to 4 percent. On that basis, when moving up 40 basis points from 1.8 percent to 2.2 percent, that’s ideal for inflation control.

“But when we’re talking about GDP growth, we want to see higher numbers to make a more meaningful impact on unemployment, higher numbers to make a more meaningful impact on national development, and higher numbers to make a more meaningful impact on the current account balance both on the monetary and fiscal side,” he added.

“The reality is any projected growth upgrade is positive news, but.... it’s not one to get overly-excited about. It’s an indication of the future. It’s a projection, not an actual outcome.” The IMF has previously estimated that The Bahamas needs to achieve consistent annual GDP growth of 5.5 percent to cut existing unemployment by half and find jobs for all new school leavers,

Pointing to the Government’s energy reforms as an example, Mr Bowe added that The Bahamas must execute properly to ensure that both businesses and households feel the benefits of lower-cost, more reliable electricity. The resulting savings, in theory, will fuel greater consumption spending by Bahamian consumers and an increased willingness to expand and hire among companies.

And the IMF also appeared to express scepticism that the Government will achieve the projected $75.5m Budget surplus forecast for the current 2025-2026 fiscal year as it instead predicted a modest deficit of 0.4 percent - equivalent to around $60m.

The IMF’s growth revisions are in line with Standard & Poor’s (S&P) recent Bahamas assessment, which predicted this nation’s economy will grow by 2.1 percent in 2025 due to “booming cruise tourism and continued investments across the Family Islands”. However, it forecast that GDP expansion will temper more swiftly than the IMF’s predictions by dropping to 1.7 percent in 2026 and moving forward.

Both the IMF and S&P appear to have based their growth analysis, at least to some extent, on the revised 3.4 percent GDP expansion calculated by the Bahamas National Statistical Institute (BNSI) for 2024. The Fund’s data now reflects 3.4 percent growth for last year, while S&P said this was a key factor behind its decision to improve The Bahamas’ sovereign credit rating.

“The Bahamas’ GDP grew at a stronger pace of 3.4 percent in 2024, following revised GDP data collection methods from the Bahamas National Statistical Institute, including wider geographic coverage across the Family Islands,” S&P added. 

“Further, the Bahamas’ tourism sector continued to perform very well, particularly within the cruise segment. Total arrivals in 2024 were 11.2m compared with 9.6m the year before and up about 153 percent from 2019. The economy also had support from sustained investments across the Family Islands.

“We expect growth in 2025 will remain above potential at 2.1 percent, accounting for continued buoyancy in tourism despite challenges in key source markets. GDP per capita is estimated at $39,590. The number of inbound arrivals reached 6.3m in the first half of 2025, compared with 5.7m during the same period in 2024.”