Paul I Jukic  05/08/2009 11:40:58 AM  From  DB/Inbox:  Search Results

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UNCLAS        NASSAU 00129
CXNASSAU:
    ACTION: AMB
    INFO:   DCM ECON POL

DISSEMINATION: AMB /1
CHARGE: PROG

APPROVED: CDA:TZUNIGA-BROWN
DRAFTED: ECON/COMM:TROLLE-NEW
CLEARED: POL/ECON:JDUBEL

VZCZCBHI225
RR RUEHC RUCNCOM
DE RUEHBH #0129 0622208
ZNR UUUUU ZZH
R 032208Z MAR 09
FM AMEMBASSY NASSAU
TO RUEHC/SECSTATE WASHDC 6166
INFO RUCNCOM/EC CARICOM COLLECTIVE

UNCLAS NASSAU 000129 
 
STATE FOR WHA/CAR 
SANTO DOMINGO FOR USFCS 
 
E.O. 12958:  N/A 
TAGS: ECON BEXP ETRD BF
SUBJECT:  PM INGRAHAM'S MID-YEAR BUDGET REPORT - HIGH HOPES FOR 
STIMULUS PLAN 
 
REF:  NASSAU 73 
¶1. SUMMARY:  Prime Minister Ingraham presented his mid-year budget 
report to Parliament on February 25, forecasting a grim outlook for 
2009 as The Bahamas deals with "the most challenging global economic 
environment" seen in many years.  Ingraham outlined plans to borrow 
USD $200 million from banks to cover costs of an economic stimulus 
plan and to make up for a shortfall in government revenue.  In 
addition, Ingraham reported a 4.6% decrease in total visitor 
arrivals in 2008 and a 7.4% drop in hotel occupancy rates as 
evidence of the negative effects of the global economic downturn in 
The Bahamas.  On a brighter note, the PM cited a USD $219.4 million 
increase in construction start-up projects in 2008 and an economic 
stimulus plan focused on infrastructure projects as hope for a 
respite from the current economic conditions.  End Summary. 
------------------------------------------ 
GOVERNMENT MAKES PLANS AS TOURISM DECLINES 
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¶2.  Prime Minister Ingraham presented his mid-year budget report to 
Parliament on February 25, forecasting a grim outlook for 2009 as 
The Bahamas deals with "the most challenging global economic 
environment" seen in many years.  Ingraham outlined GCOB plans to 
borrow USD$200 million to make up for revenue shortfalls and cover 
costs of the much talked about economic stimulus plan.  While the 
extra funds will certainly stimulate the economy in the short term, 
financial analysts are concerned about the increase in national debt 
caused by the loan.  The loan stands to increase the country's 
debt-to-ratio GDP between 44 and 46 percent, which could raise 
concerns from the International Monetary Fund (IMF) and other global 
agencies that the country is over-borrowing.  The PM indicated a 
possible visit by the IMF in late March that would "provide 
objective and independent assessment on the outlook for the Bahamian 
economy."  The PM also noted plans to shuffle existing government 
funds among ministries and departments in an effort to not spend 
"any more in total than was already approved by parliament last 
May." 
 
¶3.  The PM discussed the tourism decline in 2008, reporting a 4.6% 
decrease in total visitor arrivals in 2008 and a 7.4% drop in hotel 
occupancy rates, noting that the decline in U.S. visitor arrivals 
outweighed any benefits gained by the moderate increase in visitors 
from Canada and Europe.  The PM said the global economic downturn 
helped drive air and sea arrivals down by 6.4% and 3.8% respectively 
in 2008.  In addition, the PM said the economy will "likely 
experience a modest contraction in 2009" amidst swelling inflation 
and an increase in non-performing loans.  Government revenue in 
import/export duties and excise tax fell below forecast by USD $39.1 
million and USD $18.1 million respectively.  Conversely, there were 
modest gains over forecast in real property tax by $7.1 million, 
immigration fees by $8.7 million and stamp tax by $5.4 million. 
With continued job losses (300 since January 1) and reduced work 
weeks, the GCOB has tasked the Department of Statistics to conduct 
an interim Labor Force Survey in order to track current unemployment 
and underemployment. 
 
¶4.  On a brighter note, the PM cited a USD $219.4 million increase 
in construction start-up projects and a 24% increase in foreign 
currency reserves in 2008.  The PM emphasized the GCOB's commitment 
to an economic stimulus plan focusing primarily on infrastructure 
projects to boost the economy while at the same time maintaining 
"sound macroeconomic and fiscal fundamentals."  Ingraham vowed that 
the stimulus plan will not add to the overall economic deficit, but 
rather assist in the short-term. 
 
¶5.  Despite positive reports on construction start-up rates in the 
country, President of the Contractor's Association Stephen Wrinkle 
told local media the majority of contractors were out of work in 
¶2008.  Wrinkle said the statistics reported by the PM do not present 
a clear indication of the industry's performance and that things are 
worse than they seem. 
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COMMENT 
------- 
¶6.  The PM continues to exude calm and patience in the wake of the 
global economic crisis, encouraging Bahamians to hope for a speedy 
U.S. recovery so that tourists return to the islands.  As with other 
countries dealing with a struggling economy, the GCOB is trying so 
spend their way out of a recession.   Whether the plan works remains 
to be seen. 
 
 
ZUNIGA-BROWN