The Bahamas Economy established itself of on very profitable and sustainable income sources. It allowed the West Indies nation to reach highest human development index and steady growth of incomes. It allowed the government to be very discreet on what businesses to accept on islands, and what not. Moreover it allowed decent social standards with high level of unemployment. It seems that Bahamas got into the perfect storm in 2020 and there is little hope to maintain all this plenty.
Bahamian ministry of tourism is the main ministry in the government. Exactly 51 percent of the nation’s income comes from tourism. The overwhelming majority of tourists come from United States – 80 percent. Bahamas is popular destination for Brits and continental Europeans too. It is a rich public which often comes on cruisers and private jets.
Bahamas is also known as the offshore banking centre. It’s importance for the World’s shadow economy has failed significantly as stricter laws were introduced. Since the early 2000’s share of banking and financial services in GDP are declining. It is a healthy 15-17 percent though. Offshore status is supported by zero rate income tax, corporate tax, capital gains tax, and wealth tax.
Only 10 percent of GDP is generated by something you actually may touch. Most of the industries and agriculture serves the local needs. Bahamas have huge trade deficit but under ordinary circumstances it is not important: tourism incomes leverage it all.
And then came the virus
Bahamas has reported 104 infected and eleven dead. The virus does not spread further. Most of the days the new cases is zero. So the nation itself felt no scrutiny at all. Business did. There is no influx of tourists, no cruise ships on the horizon, no business jets in the sky. The local ministry of tourism spends fortunes on international PR. The message is, oversimplified, that everything will return back to normal. That some easing is already in place and soon the islands will be opened for luxurious yachts and private jets. Then cruise ships will follow. And the regular Joe too.
No, it wouldn’t. COVID outbreak is not a significant event on a planetary scale. The reaction on it, or perhaps and overreaction, is more important. The cruise lines are suspended at least until October. The travel restrictions are harsh. The impact of the COVID-19 is devastating and spreading. Serious crisis is ahead of Bahamas. It will not resolve himself.
It is the right time to rethink the strategy and switch to the survival. Crisis can be an opportunity for Bahamas to relaunch the economy in less glamorous but realistic ways. The market forces are already making suggestions. Real estate prices are falling. Some properties lost 30 percent and are still unsold. Maybe a broader involvement of the foreign capital is the answer?
The government will have to guess the right way – if there is a right way at all. Tourism-based economies are vulnerable and tend to collapse even without the global pandemics.