NASSAU, Bahamas — In a release from the World Economic Outlook for October 2020, the International Monetary Fund (IMF) has projected The Bahamas’ economy will contract 14.8 percent this year before rebounding by 4.6 percent in 2021. Five years out from the COVID-19 economic crisis, the IMF has projected economic growth of 1.5 percent.
The IMF has projected downgrades in some emerging and developing economies, with an outlook of a 5.4 percent contraction in the Caribbean region’s real gross domestic product (GDP), which it notes will rebound in 2021 with 3.9 percent growth.
The fund has also projected a 17.5 percent contraction in account balances this year, which it expects to ease in 2021 when it projects an account balance contraction of 15.9 percent and 7.7 percent in 2025.
Consumer prices in The Bahamas are projected to increase by 1.8 percent this year and continue rising by 2.1 percent in 2021. The IMF has projected consumer prices will balloon by 2.2 percent in 2025.
Speaking to the impact of the COVID-19 pandemic on economies around the world, the IMF in its report entitled “World Economic Outlook, October 2020: A Long and Difficult Ascent” states that both advanced and emerging market economies are likely to register significant losses of output relative to their pre-pandemic forecasts.
“Small states as well as tourism-dependent and commodities-based economies are in a particularly difficult spot. Most economies will experience lasting damage to supply potential, reflecting scars from the deep recession this year and the need for structural change. The persistent output losses imply a major setback to living standards relative to what was expected before the pandemic,” the IMF states in the report.
It continues, “Moreover, sovereign debt levels are set to increase significantly even as downgrades to potential output imply a smaller tax base that makes it harder to service the debt. On the plus side, the prospects of low interest rates over a longer period, alongside the projected rebound in growth in 2021, can help alleviate debt service burdens in many countries. To ensure that debt remains on a sustainable path over the medium term, governments may need to increase the progressivity of their taxes and ensure that corporations pay their fair share of taxes while eliminating wasteful spending.”
Republished with permission of the Nassau Guardian