In defiance to the global downturn, Bahamians are being urged to consider the period of slowed business activity as down time in which to prepare for the next growth cycle.
The global financial crisis, and in particular its effects in the US, is taking an increasing toll on the economy, with job losses rising, the key tourism sector seeing bookings drop and predictions that 2009 will be a difficult year.
Speaking at the opening of the 18th Bahamas Business Outlook, held on January 15, Prime Minister Hubert Ingraham said it was an opportune time for the government to renew its focus on improving efficiencies in the economy by reducing bureaucracy and red tape, increasing the use of technology, expediting the delivery of service and otherwise reducing the cost of doing business - moves that he said should be duplicated in the private sector.
This sentiment was echoed by Sarkis Izmirlian, chief executive officer of resort management firm Baha Mar, who said the private and public sectors should develop initiatives that will ultimately help the destination prepare and prosper during better times ahead.
"The world will recover and the Bahamas needs to be ready when it does," he told delegates at the conference.
According to Ingraham, the international economic crisis underscored the heavy dependence of a small country like the Bahamas on external factors.
"While we decry this vulnerability, there is absolutely no formula by which a country of the size of the Bahamas could have achieved or could sustain its considerable high level of income without enormous external exposure," Ingraham said. "It is our trade with the outside world which produces our prosperity; it is also that which creates our vulnerability."
One of the sectors most at risk is the services industry, and in particular the tourism segment. According to official figures, the services sectors account for 72% of current account receipts, with tourism contributing 84% of that total. As such, any slump in the tourism industry will have a ripple effect through the entire economy.
A recent survey conducted by the Bahamas Hotel Association (BHA) showed just how vulnerable this key sector is to the global downturn. According to the study, released at the end of January, 65% of the country's hotels cut staff over the past year, with 83% reporting they had reduced working hours for employees due to the fall in trade. Just over three quarters of respondents to the BHA survey reported a decline in revenue and room occupancy in 2008, with 52% reporting a net loss and 78% expecting further declines in 2009.
The government is trying to support the flagging tourism sector, increasing spending on promotion and reducing some airport charges, while also seeking to kick start growth in other areas of the economy.
As part of its economic stimulus package, the government has also accelerated its public works programme, boosting spending on roads, public housing, schools and state buildings. While providing some relief to the construction sector, which has been affected by a number of major tourism development projects being put on hold, the state is limited in the scope of measures it can take. The government is mindful of the need to keep the deficit under control at a time when revenue growth could come under pressure.
In his January 15 address, Ingraham said care had to be taken to ensure that in the process of responding to the present economic crisis, the government does not overload itself with commitments that will jeopardise the country's future when the crisis has passed.
A report issued by the Central Bank on February 2 covering economic activity in the third quarter of 2008 said there had been a widening of the deficit, as increasing government spending outpaced the comparative recovery in revenue collections.
The third quarter had seen a moderate fall off in the economy, "due to weakness in the tourism and construction sectors and a tempering in credit-supported consumer demand", the report said.
One of the other main pillars of the Bahamian economy, the financial services sector, is displaying more resilience so far in the face of the global crisis, with the Central Bank saying liquidity in the industry remains buoyant due to growth in the deposit base.
The government has warned that the Bahamas could slip into recession this year, that unemployment could rise from the current 8.7% to double digits and that recovery is largely dependent on the US economy regaining its feet. Nonetheless, the country's quiet confidence should help it to emerge from the downturn stronger and better prepared for the future.