Identifier
Created
Classification
Origin
09NASSAU129
2009-03-03 22:08:00
UNCLASSIFIED
Embassy Nassau
Cable title:  

PM INGRAHAM'S MID-YEAR BUDGET REPORT - HIGH HOPES FOR

Tags:  ECON BEXP ETRD BF 
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Cable 
Text: 
 
 
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
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
--------------

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.
--------------
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