The overall macroeconomic, political and social environment for the 300,000 residents living in this semi-tropical paradise is that of very stable. The free market open Bahamian economy is highly integrated and inter-dependent to the affairs of the United States primariliy due to its geographical proximity of being only 45 miles off the east Florida coast.
POLITICS: Prime Minister Perry Christie is in power. The Bahamas was granted independence from the United Kingdom in 1973.
ECONOMY: tourism and offshore banking are major industries. GDP growth rebounded smartly in year 2000 primarily from a strong return in tourism visits with the re-opening of several hotels with expansion projects now completed. Tourism in 1996 accounted for an estimated 60 percent of GDP with 80 percent of the 3.4 million tourist visits to the Bahamas were Americans. Financial services within the Bahamas account for 15 percent of the economy as services as a whole represent 90 percent of the Bahamian economy. In addition, custom duties are an important revenue source as well for the Bahamas. The overall Bahamian economy has been on an upswing since 1996 as unemployment has fallen from 11 percent to the current 7 percent level.
Total GDP is at $5 billion USD (2001) with GDP/capita at $17,000 USD (2001). GDP growth rate for 2000 at 5 percent, 2001 at 3.5 percent. Low inflation rate for several years
ranging from 1.0 to 2.0 percent annually, similar inflation rates to that of the United Statees. The budget deficit has declined since the middle 1990’s. The Bahamas is a net energy importer - oil. The balance of payments accounts have improved dramatically since the late 1990’s when the Bahamas was in a massive building and construction phase with new residential homes, resorts and hotels where a temporary deficit was recorded as investment were made and goods were imported. At present, both the fiscal and capital account are okay.
The economic outlook for the Bahamas if favorable. Global tourism visits have declined since the tragic events of September 11, 2001 terrorist attacks in the United States. The majority of visitors to the Bahamas are from the U.S., and they may prefer to go places like the Bahamas that are very close to home rather than overseas. In addition, tourist visists from the Euroland euro area will benefit the Bahamas with a Bahamian exchange rate that is now at a discount to the euro.
POSITIVES: good private investment levels, the Bahamas is actively trying to balance the environment with tourism & population growth. CONCERN: transshipment centre for the drug trade and for illegal aliens destined to the United States, global warming - coral reefs & decay, hurricanes.
BANKING SYSTEM: the Bahamas is a well- known international banking centre and tax haven. Banks in the Bahamas have assets of $300 billion USD and approximately $1 trillion USD under management. Banking privacy and confidentiality are granted to those law-abiding citizens from other countries as the Bahamas firmly believes this is an important right. Healthy international reserve position as gross reserves have been steadily increasing since 1996, external reserves as of December 2002 stood at $406 million USD.
REGIONAL: United States, Caribbean
Due to geographical promiximity, the United States is an important rich market and will continue to provide economic stability to the Bahamas. Within the Caribbean region, talk of a free trade zone may result of an increase in trade of goods & services, but this impact will be minimal to the Bahamas economy and currency.
KNOWLEDGE: June 2000, OECD and the Financial Action Task Force on Money Laundering stated that the Bahamas employ ‘harmful tax competition’ measures. These threats or scare tactics in BI.C’s view will not at all disrupt the successful financial affairs of the Bahamas. The Bahamas was grouped with 35 other jurisdictions for tax haven practises. These organizations are lobbyied by many from the rich Western nations who are dismayed at losing tax revenues to offshore financial centres such as the Bahamas. The Bahamas today is no different to other financial centres that conduct business in an integrated global market. Bahamas does indeed have advanced counter-money laundering legislation in place.
Further, it was recently announced by Prime Minister Christie that the Bahamian government has vowed to streamline and reduce red-tape for foreign investors as many applications are tied up before the Bahamas Investment Authority. Literally hundreds of millions of USD are awaiting investment into the Bahamas. This is all very positive for the Bahamian economy and net reserve/asset position for this Caribbean paradise.
CURRENCY: ISO symbol ‘BSD’, Bahamian dollar. The Bahamas operate under a bimonetary system where the Bahamian dollar and the US-dollar (‘USD’) are national currency. At time of review on February 17, 2003, the Bahamian dollar had an exchange value of 1.0 BSD to the USD reflecting the currency peg at par.
CURRENCY HISTORY: the Bahamas operate under a bimonetary system since year 1966 where the Bahamian dollar and the US-dollar are national currency.
CURRENCY FORECAST: the currency peg for the Bahamian dollar to the USD (1.0) will remain in place. At present, the US-dollar is entering a bear market after several years outpeforming the majority of the world currencies. This USD depreciation will impact the Bahamian global purchasing power but it is not expected to change the hard currency peg at par to the USD. If anything, the real global purchasing power depreciation by the Bahamian and USD may increase revenues for the Bahamas particularly from those visitors from the Euroland euro currency bloc countries. For more background information on the USD, please click UNITED STATES in this currency index as presented by BankINTRODUCTIONS.com. UPDATED: February 17, 2003
