Bahamas

Politics:

• Analysis

  Bahamas politics: Quick View - Offshore oil exploration to go ahead, with c

  Event

  The environment and housing minister for the Bahamas, Kenred Dorsett, has announced that a government moratorium on offshore oil exploration will be lifted to allow one exploratory well to be drilled.

  Analysis

  Following a massive deepwater drilling disaster in the Gulf of Mexico in 2010, concern that a future spill could destroy the Bahamas' economically vital fishing and tourism industries became politically paramount. The prime minister, Perry Christie, then said that offshore oil drilling would only take place after a referendum to gain approval from the Bahamian people, and he put in place a moratorium on offshore drilling. The government now appears to have reversed this stance and will initially allow one well to be drilled by the Bahamas Petroleum Co.

  The government gave the green light after a delegation of Bahamian officials visited neighbouring Cuba. Geological surveys in Cuba's offshore waters suggest the potential for billions of barrels of oil, according to the government. Bahamas Petroleum will explore in a block around 97km from where a Russian oil company, Zarubezhneft, is currently drilling in Cuban waters.

  Legislation governing initial oil exploration and environmental protection is currently being drafted and is expected to be presented to the cabinet shortly. The leader of the opposition Free National Movement (FNM), Hubert Minnis, has demanded strict regulations be put in place before any drilling commences. If drilling results are positive, a referendum will then be held, but as exploration results will not be available until 2014, a referendum and subsequent development of a longer-term policy on exploration, development of oil fields and the tax regime to govern the sector will be pushed back until 2015 at the earliest.

  March 20, 2013

• Background

  Bahamas: Key figures

  Hubert Ingraham

  The prime minister. Mr Ingraham is an able and experienced political leader, who was previously prime minister between 1992 and 2002 and whose return in 2005 to the leadership of his party, the Free National Movement (FNM), facilitated its election victory in 2007.

  Tommy Turnquest

  Minister of immigration and national security. Mr Turnquest was the leader of the FNM between 2001 and 2005, following a divisive power struggle. He is still an important cabinet figure, but his influence was lessened by poor electoral results under his leadership and by comparisons with Mr Ingraham.

  Perry Gladstone Christie

  The current leader of the opposition and previous prime minister (2002-07), Mr Christie oversaw a boost in tourism-related property development, but his position was damaged by his party's election loss in 2007.

  The judiciary

  The judiciary is independent and is modelled broadly on the British system. The final court of appeal is the Judicial Committee of the Privy Council, which is based in London, but has occasionally sat in Nassau.

  The legislature

  The 1973 constitution is similar to that of most former British colonies. Elections for the House of Assembly are held every five years, unless parliament is dissolved earlier. The prime minister is the leader of the majority party in the Assembly and chooses a cabinet with at least eight other ministers. The 16 members of the Senate (the upper house) are appointed by the governor-general, nine on the advice of the prime minister, four on the advice of the leader of the opposition and three on the advice of the prime minister after consultation with the leader of the opposition. The British monarch is head of state, and is represented by a governor-general, currently Arthur Hanna. The latter is nominated by the Bahamian prime minister, but takes no direct part in government. For most purposes, the governor-general acts on the advice of the prime minister or, when appointing a prime minister, in accordance with the Assembly majority. Policy formation and administration is reasonably effective. A local government system for Grand Bahama and the Family Islands—the Bahamian islands other than New Providence—was introduced in 1996. Elected councils in 23 local government districts are responsible for maintaining government buildings and for road traffic, town planning and business licences. In the larger districts, a second tier of elected town councils has minor responsibilities.

  Media services

  The media is generally free. The government owns and operates four radio stations and one television channel; four independent radio stations also broadcast from Nassau, and one from Grand Bahama. Most islands have a cable television service. The Nassau Guardian, Tribune, Bahama Journal (evening) and Freeport News are daily newspapers. The Punch is a widely read, twice-weekly tabloid paper. Some Family Islands also have weekly newspapers.

  July 29, 2008

• Structure

  Bahamas: Political structure

  Official name

  Commonwealth of the Bahamas

  Form of state

  Representative democracy

  Head of state

  Queen Elizabeth II, represented by a governor-general appointed on the advice of the Bahamian cabinet

  The executive

  The prime minister, appointed by the governor-general, heads a government responsible to the House of Assembly (the lower house)

  National legislature

  Bicameral; the 16-member Senate (the upper house) has nine members appointed on the advice of the prime minister, four on the advice of the opposition leader and three on the advice of the prime minister, after discussion with the opposition leader; the 38-member lower house is directly elected by district and sits for no longer than five years

  Legal system

  Based on the British system, with a UK-style hierarchy of courts: magistrates court, Supreme Court, Court of Appeal, and, in some cases, the UK Privy Council

  National elections

  May 7th 2012; next general election due by May 2017

  National government

  The Progressive Liberal Party holds 29 seats in the lower house

  Main political organisations

  Government: Progressive Liberal Party (PLP)

  Opposition: Free National Movement (FNM), nine seats

  Key ministers

  Prime minister & minister of finance : Perry Christie

  Deputy prime minister & minister of works & urban development: Philip Davis

  Agriculture, marine resources & local government: Alfred Gray

  Attorney-general & legal affairs: Allyson Maynard Gibson

  Education, science & technology: Jerome Fitzgerald

  Environment & housing: Kendred Dorsett

  Health: Perry Gomez

  Financial services: Ryan Pinder

  Labour & national insurance: Shane Gibson

  National security: Bernard Nottage

  Social services: Melanie Griffin

  Tourism: Obediah Wilchcombe

  Transport & aviation: Glenys Martin

  Youth, sports & culture: Daniel Johnson

  Ministers of state

  Aviation & transport: Hope Strachan

  Finance: Michael Halkitis

  Foreign affairs & immigration: Frederick Mitchell

  Investments: Khaalis Rolle

  Legal affairs: Damian Gomez

  National security: Keith Bell

  Governor of the Central Bank

  Wendy Craigg

  January 14, 2013

Economy:

• Background

  Bahamas: Economic background

  Bahamas: economic structure, GDP by sector
  (% of total; fiscal years Jul-Jun)
  	2000/01	2001/02	2002/03	2003/04	2004/05
  Agriculture & fishing	2.8	2.5	3.1	3.1	2.4
  Industry	11.0	9.7	9.8	9.6	9.2
  Construction	9.9	8.7	8.6	8.4	8.0
  Manufacturing	4.6	5.3	5.3	5.2	5.3
  Services	81.6	82.5	81.8	82.1	83.1
  Source: Caribbean Development Bank, Social and Economic Indicators.

  Download text file (csv format)

  July 29, 2008

• Structure

  Bahamas: Economic structure

  Economic structure: Annual indicators

  	2008a	2009a	2010a	2011a	2012b
  GDP at market prices (B$ bn)	8.2	7.7	7.8	7.8	7.8
  GDP (US$ bn)	8.2	7.7	7.8	7.8	7.8
  Real GDP growth (%)	-2.3	-4.9	0.2	1.6	2.3
  Consumer price inflation (av; %)	4.5	2.1	1.3	3.2	2.7
  Population (m)	0.3	0.3	0.3	0.3	0.4
  Exports of goods fob (US$ m)	955.9	710.7	702.4	834.9	750.0
  Imports of goods fob (US$ m)	-3,198.9	-2,535.9	-2,591.6	-2,965.6	-2,882.3
  Current-account balance (US$ m)	-1,222.1	-809.0	-814.0	-1,090.9	-1,166.1
  Foreign-exchange reserves excl gold (US$ m)	567.9	1,009.8	1,044.2	1,070.2	1,095.0
  Exchange rate (av) B$:US$	1.00	1.00	1.00	1.00	1.00a
  a Actual. b Economist Intelligence Unit estimates.

  Download the numbers in Excel

  Origins of gross domestic product 2011	% of total	Components of gross domestic product 2010	% of total
  Financial services & real estate	11.8	Private consumption	66.8
  Hotels & restaurants	15.8	Government consumption	14.1
  Wholesale & retail trade	12.8	Gross domestic investment	21.3
  Industry	7.7	Change in stocks	1.1
  Public administration & defence	5.8	Exports of goods & services	44.4
  Construction	7.3	Imports of goods & services	46.6
  Communication & storage	2.9
  Education	4
  Healthcare	3.7
  Principal domestic exports 2011	% of total	Principal imports cif 2011	% of total
  Chemicals	34.5	Mineral fuels	27.3
  Mineral fuels	29.7	Machinery & transport equipment	17.1
  Machinery & transport equipment	11.9	Food & live animals	13.6
  Food & live animals	10.5	Manufactures	13.1
  Crude materials & inedibles excl fuels	6.2	Chemicals	11.3
  Main destinations of exports 2011	% of total	Main origins of imports 2011	% of total
  US	28.2	US	27.9
  Singapore	27.0	India	20.2
  Germany	8.6	South Korea	14.4
  EU	2.6	Venezuela	9.7
  Dominican Republic	5.2	Singapore	7.8

  Download the numbers in Excel

  Download text file (csv format)

  January 14, 2013

• Outlook

  Bahamas: Country outlook

  Bahamas: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  OVERVIEW: Buoyed by high public support and an overwhelming majority in the legislature, the prime minister, Perry Christie, will face little resistance to implementing his government's agenda in the 2013-14 forecast period. Unemployment, the slow pace of economic recovery, a weakened fiscal position and a recent rise in crime are the government's main challenges. After narrowing to an estimated 3.9% of GDP in 2011/12 (July-June), on the back of privatisation income, the fiscal deficit will widen to 4.1% of GDP in 2012/13 and 2013/14, as expansionary fiscal policies are pursued. The wide fiscal deficit throughout 2013-14 and beyond will drive a marked deterioration in the debt/GDP ratio, to above 50%. The Economist Intelligence Unit expects investment in the tourism and construction sectors and recovering services exports to underpin moderate GDP growth at an average of 2.6% in 2013-14. An easing of international commodity prices in 2012 contained consumer price inflation, but improving consumer demand and firmer prices will lift inflation modestly to average 3% in 2013-14. A decline in construction-related imports and a gradual recovery in tourism will support a narrowing of the current-account deficit, from a peak of 14.9% of GDP in 2012 to 11.8% of GDP in 2014.

  DOMESTIC POLITICS: Mr Christie took office for a five-year term in May 2012, following a landslide election victory for the centre-left Progressive Liberal Party (PLP). The previously governing centre-right Free National Movement (FNM) has now become the main opposition. Mr Christie scored one of the biggest electoral wins ever witnessed in the Bahamas, with the PLP garnering 29 of the 38 seats in the lower house of parliament. A further seat was won for the PLP in a by-election in October, ensuring the government a strong mandate to advance its policy programme. However, the PLP is facing the same ills that troubled the previous government, namely, high unemployment, rising crime rates and a tepid economic recovery, prone to setbacks. The FNM's poor election performance reflected a strong rise in nationalist sentiment brought on by opposition to privatisation and foreign investment policies in telecommunications, tourism and other infrastructure sectors-policies that the PLP has pledged to roll back. However, with the possible exception of a re-nationalisation of the Bahamas Telecommunications Company, we do not expect a wholesale change to the otherwise pro-business stance of the Bahamas government, given the importance of foreign investment to the economy. A referendum vote will be held on January 28th to decide on whether to allow some limited forms of gambling in the Bahamas. Voters will be asked to approve the creation of a national lottery and/or the establishment of a regulatory regime to allow online gaming. The vote will be decided by simple majority, but is strongly opposed by church groups and is expected to be close. A "yes" vote could provide a significant fiscal revenue boost. Security will remain a major issue and a top public concern at the forefront of political debate, in spite of legislation introduced under the previous government to clamp down on firearms use and drug-related crime. An increase in labour disputes and trade union agitation is possible, as organised labour seeks to take advantage of the PLP's deeper sympathy with labour organisations. The government's relations with the public sector unions were extremely fragile under the FNM administration, and ongoing fiscal reforms to keep public spending in check will prevent the government's adopting a more expansionary fiscal policy to boost public sector wages and employment opportunities. Despite these difficulties, governance is unlikely to be damaged in 2013-14. Mr Christie represents a fresh governing style and he will enjoy broad public support and an extended "honeymoon" period in the first half of his term. Given the PLP's overwhelming majority in the legislature, we do not anticipate any significant challenge to governance emerging in 2013-14, either from within the legislature or from organised labour and civil society in general. However, a major risk to this outlook would stem from high levels of unemployment, if a tepid economic recovery suffers a reversal and job creation remains below par.

  INTERNATIONAL RELATIONS: Efforts to control drug-trafficking through the Bahamas will remain a priority for the new government and will form the basis of relations with the US, which will remain generally positive. The PLP will continue to pursue friendly relations with China, which has become a major source of investment in the tourist sector in recent years. However, the issue of imported Chinese labour as part of China's investment strategy will remain publicly contentious, and may affect relations with the Asian nation if the government is forced to review existing agreements. Controlling illegal immigration will remain a priority for the security forces; in particular, curbing the entry of undocumented migrants from neighbouring Haiti is a sensitive political issue, given that country's economic and security frailties. The authorities' handling of the matter, which will continue to arouse strong emotions within the Bahamas, will attract ongoing close international scrutiny. A small, but vocal, section of the public will continue to oppose any future free-trade agreements, mainly on ideological grounds, but the Bahamas will remain a member of the Caribbean Community, and diplomatic relations with its neighbours and trade partners will remain generally positive.

  POLICY TRENDS: Mr Christie will prioritise expansionary spending over fiscal consolidation, in a bid to stimulate economic growth and boost employment opportunities and domestic demand. Any retrenchment in public spending and fiscal consolidation will therefore be piecemeal and subject to setbacks. Moderate real GDP growth will limit revenue growth, which has fallen below budget targets consistently since 2009. An end to income from privatisations will limit prospects for a reduction of the public debt burden, which has grown rapidly following wide fiscal deficits, averaging an estimated 4.3% of GDP in 2009-12. We expect deficit reduction to advance slowly and the government to reverse its election pledge not to raise taxes, in a bid to boost revenue to prevent further sharp increases in public debt-service costs. A heavy reliance on tourism and the US market will limit policies to boost domestic demand, and unemployment will remain high compared with historical averages. Despite an anti-privatisation stand by the new government, the Bahamas will continue to benefit from an open economy and a relatively well-off and educated workforce. The government will seek to attract a greater number of visitors and investment from faster-growing markets, such as Latin America and Asia. The fortunes of the tourism industry will also largely dictate the course of recovery in the construction sector, which was hard hit by the 2008-09 downturn. In terms of monetary policy, there is an ample stock of foreign reserves, equivalent to around 4.5 months of import cover, which will be supportive of the parity exchange-rate peg with the US dollar, thereby underpinning confidence in monetary stability. Work on the US$3.4bn Baha Mar tourism mega-development has created a huge number of construction jobs for the local population. Reforms will continue to move the country gradually towards becoming a member of the World Trade Organisation (WTO). They will include new customs legislation; amendments to existing intellectual property legislation; a foreign investment law; the introduction of new rules governing technical standards, sanitary and phytosanitary standards; and the operation of a competition law regime. We do not expect the Bahamas to obtain full WTO membership in 2013-14, as the negotiation process is likely to take at least until 2014. After narrowing to an estimated 3.9% of GDP in fiscal year 2011/12 on the back of privatisation income-despite budget revenue targets being missed-the fiscal deficit will widen again in fiscal year 2012/13. The government anticipates continuing to run a wide fiscal deficit throughout 2013-14. In addition, it anticipates continuing to borrow to fund heightened spending on infrastructure, as the new government intends to accelerate current and capital spending, while revenue growth remains at best tepid and income from privatisations peters out. Furthermore, the 2012 budget presentation contained few new revenue-raising measures (apart from an increase in departure taxes), but did include a B$25m (US$25m) programme aimed at creating 3,000 new public-sector jobs. As a result, we expect the fiscal deficit to remain wide, above 4% of GDP in 2012/13 and 2013/14. While some fiscal consolidation can be expected as growth rebounds, revenue growth will remain muted and the government will continue to run high deficits relative to the mainly modest deficit position before 2009. The resulting fiscal imbalance will result in a marked deterioration in the public-sector debt/GDP ratio in the context of weak growth. The public-sector debt/GDP ratio has increased markedly in recent years and official forecasts indicate that debt levels will mount, adding further pressure on the fiscal balance. The debt/GDP ratio is expected to climb sharply, from an estimated 46.2% in 2011/12 (up from 38.6% three years previously) to 50.6% in 2012/13 and 54.5% in 2013/14. The weak fiscal outlook and rising debt burden has prompted credit ratings agencies successively to downgrade the outlook for the Bahamas' sovereign debt rating in 2012. The prospect of a sharp increase in borrowing costs raises the risk of further downgrades for the Bahamas and the loss of its investment-grade rating. This is not currently our central forecast scenario, as the Bahamas' debt/GDP ratio is still below the average for the Caribbean and the sovereign will retain access to ample financing from domestic sources. However, a downgrade could temper the government's enthusiasm for further debt accumulation related to planned infrastructure spending. In addition, rapidly rising domestic debt is a source of concern, as it risks crowding out the private sector. Capital spending will be financed mainly by a combination of domestic-currency borrowing and US-dollar borrowing in both domestic and overseas markets, as well as some multilateral funding.

  ECONOMIC GROWTH: The domestic economy will continue to recover in 2013-14, although growth will be hindered by a tepid US recovery and persistent, albeit declining, risks for the global economy, emanating primarily from the euro zone. We estimate real GDP growth of 2.3% in 2012-a slight pick-up from growth of 1.6% in 2011. A stronger near-term recovery in activity will be prevented by only a modest recovery in tourist arrivals from the US. Growth will be underpinned by foreign investment in tourism-related infrastructure projects, which will boost construction activity, employment and income, leading to a moderate recovery in domestic demand and a slightly quicker pace of growth, to an average 2.6% of GDP in 2013-14. Still faster rates are likely to be achieved beyond 2013-14, when major new tourism capacity comes on stream and the US recovery gains sufficient strength to boost arrivals and visitor spending levels, buoying Bahamian domestic demand. Unemployment will continue to decline gradually after spiking to a peak in 2010. Private-sector projects, particularly in the real estate and tourism sectors, will pick up in line with an easing of financing restrictions in the latter half of 2013-14 and as foreign demand recovers. The construction sector will benefit from several large-scale tourism-related investments, particularly the Baha Mar tourism complex, which is due to begin receiving its first visitors in late 2014. However, renewed investment activity will take time to feed through to the broader economy, keeping GDP growth below potential in the nearer term.

  EXTERNAL ACCOUNT: A weak export performance and modest recovery in import demand kept the trade deficit wide at an estimated US$2.1bn (27.3% of GDP) in 2012. Higher international oil prices and investment in construction acted to boost the import bill. However, we estimate a slight narrowing of the trade deficit in 2013-14 as growth gains traction and exports recover, and as existing investment projects mature construction-related import demand will decline and offset a gradual recovery in other import demand segments. The current-account deficit will narrow from an estimated low of 14.9% of GDP in 2012 to 13.4% of GDP in 2013 and 11.8% of GDP in 2014, owing partly to improving services inflows. Tourism will support the small services surplus, but recent strong gains in tourist arrivals and earnings since 2010 are set to level off until 2014. Remittance income from Bahamians working abroad will stage a mild recovery in 2013-14, as job prospects in the US pick up. The US will remain the Bahamas' most important trading partner, as the source of around 80% of total imports and the market for over three-quarters of all exports.

  January 15, 2013

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Country Briefing

Land area

13,939 sq km; comprises 700 islands and more than 2,000 islets (cays), 80 km off the south-eastern coast of Florida

Population

307,451 (mid-2008 official estimate)

Main town

Nassau (capital), population 212,432 (2000)

Climate

Subtropical

Weather in Nassau (altitude 4 metres)

Hottest month, August, 24-32°C; coldest months, January and February, 17-25°C (average monthly minimum and maximum); driest month, December, 33 mm average rainfall; wettest month, September, 175 mm average rainfall

Language

English

Measures

US system

Currency

Bahamas dollar (B$) = 100 cents; the Bahamas dollar is pegged at parity with the US dollar at B$1:US$1

Fiscal year

July-June

Time

5 hours behind GMT; 4 hours behind GMT from first Sunday in April to last Sunday in October; the time zone coincides all year round with US Eastern Standard Time

Public holidays

January 1st, Good Friday, Easter Monday, Whit Monday (seven weeks after Easter Monday), first Friday in June (Labour Day), July 10th (Independence), first Monday in August (Emancipation Day), October 12th (Discovery Day), December 25th-26th

January 14, 2013