The Bahamas: Staff Report for the 2015 Article IV Consultation
IMF Staff Country Reports, July 27, 2015
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Bibliographic details
- Published: July 27, 2015
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781513502649.002
Context and recent developments
- Economic activity strengthened somewhat in 2014.
- The external current account deficit worsened primarily as a result of Baha Mar construction-related imports.
- The authorities continued to make substantial progress on fiscal consolidation with successful VAT implementation in January 2015 setting the stage for continued improvements in the fiscal position.
- Lower oil prices helped keep inflation anchored in 2014.
- Notwithstanding the capital flow management (CFM) regime, international reserves remain low.
- The pre-crisis credit boom has left the banking system with an overhang of non-performing loans, which will likely continue to generate headwinds for the economy.
- Despite the non-performing loan overhang, the banking system remains very well capitalized and liquid.
Key findings and outlook
- Growth outlook remains well below pre-global crisis levels despite the U.S. recovery and the imminent opening of the Baha Mar resort.
- Rebuilding fiscal and external buffers will be essential for sustaining macroeconomic stability.
- The fixed exchange rate peg constrains monetary policy, leaving fiscal policy as the main instrument for macroeconomic stabilization.
Policy recommendations
- Reigniting strong and inclusive medium-term growth:
- Implement structural reforms to address longstanding competitiveness issues, including labor market impediments to growth.
- Pursue energy sector reforms to substantially lower energy costs, boost productivity, and facilitate economic diversification in the medium term.
- Develop a diversification strategy that explores increasing value added in the tourism sector, including through deepening linkages with agriculture.
- Rebuilding fiscal and external buffers:
- Steadfast implementation of the VAT (implemented January 2015) and expenditure rationalization within a medium-term budgetary framework.
- Advance public enterprise reforms to help rebuild fiscal buffers and support international reserves.
- Preserving financial sector stability:
- Put in place measures to resolve the debt overhang from non-performing loans.
- Further strengthen the regulatory and supervisory framework for the banking system.
Subject focus and keywords (as provided)
- Subjects: Commercial banks, Credit, Financial institutions, Fiscal consolidation, Fiscal policy, International reserves, Money, Public debt, Taxes, Value-added tax
- Keywords: banking system, Caribbean, CARTAC mission, central bank, Commercial banks, CR, Credit, credit growth, debt GDP ratio, deficit, Fiscal consolidation, GDP, Global, IDB participation, ISCR, Potential GDP growth, Value-added tax
Source: The Bahamas: Staff Report for the 2015 Article IV Consultation, IMF Staff Country Reports 2015, No. 2015/203 (Pages: 64; DOI: https://doi.org/10.5089/9781513502649.002).