geoning demands on Government from a
yet developing archipelagic nation.
Mr. Speaker,
As I have explained previously, we have
sought to bring order to our public finances, not merely for the sake of doing
so, but because healthy public finances are
a crucial prerequisite to maintaining and
enhancing confidence in The Bahamas as
a desirable and attractive location for investment, growth and job creation. Strong
finances are also vital to the viability and
continuity of the public programmes and
services that Bahamians need and demand
of a modern Government.
II. THE GLOBAL ECONOMY
Mr. Speaker,
As I explained in the Mid-Year Budget
Statement, the global economic environment continues to be very challenging.
Indeed, in its latest World Economic Outlook of April 2016, the IMF suggests that
the world economy is, in its words, “faltering from too slow growth for too long”
and that the recovery remains fragile and
still vulnerable to a number of risks.
On that basis, the IMF has yet again
downgraded its forecast for world output
growth to 3.2 per cent in 2016, down a
further 0.2 percentage points from only
three months ago. More significantly, the
Fund asserts that we now face a risk that
persistent slow growth could lead to
damaging longer term effects on the social and political fabric of nations, to lower potential economic expansion and to
weak prospects for employment growth
around the globe.
I would note, in particular, that the IMF is
concerned that the consecutive and persistent downgrades to growth prospects
run the risk of the world economy reaching so-called “stalling speed” and falling into
secular stagnation.The Fund therefore calls
on governments to pursue aggressive actions to support the recovery and enact
the critically needed structural reforms to
bolster the potential growth of their economies.
For The Bahamas, the implications are clear.
We must, on the one hand, protect the
hard-won improvements in our public finances that have to date been secured and
persevere with the further improvements
that are planned. That is critical to maintaining confidence in our nation as a very
attractive locale for investment. We must
also address the various structural reforms
that are necessary to boost productivity
and enhance the competitiveness of our
economy. As I explained in last year’s Budget Communication, in the Mid-Year Budget Statement and again in brief review
earlier, we have begun to implement reforms to that end. The development and
effective implementation of the National
Development Plan will also be vital in this
regard.
The IMF now projects the world economy to grow by 3.2 per cent this year and
3.5 per cent in 2017. The advanced economies are forecast to grow by a more
modest 2 per cent in 2016, on the basis
of relatively weak demand conditions, unfavourable demographics and low productivity growth.
On a somewhat more positive note, growth
in the United States, our major trading partner, is expected to be slightly more buoyant,
expanding by 2.4 per cent i n 2016, with a
further modest strengthening in 2017. Domestic demand is expected to be supported by improved public finances, as well as
stronger housing and labour markets. Following its most recent meeting, the Federal Reserve noted these areas of strength,
in addition to the solid rate of growth of
household real incomes and the high level
of consumer sentiment. The Fed agreed,
dependent on future economic developments, to maintain its accommodative
monetary policy stance, with interest rates
expected to remain at relatively low levels for some time. These factors and the
general outlook in the U.S. economy augur
well for the further expansion of our key
tourism sector this year and beyond.
Elsewhere, the Euro economy is forecast
to experience ongoing modest growth, at
around 1.5 per cent this year and next, as
a result of persistently high unemployment,
weak balance sheets and low investment.
Modest economic expansion is also expected in both Canada and the U.K.
One critical factor for global prospects
is the outlook for the Chinese economy
which is presently transitioning from a focus on investment and manufacturing to a
more sustainable path based on consumption and services, While down somewhat
from recent experience, real growth in
China is still forecast at just in excess of 6
per cent per annum.
III. THE BAHAMIAN ECONOMY
Mr. Speaker,
I now turn to recent domestic economic
developments and prospects for the future.
In its latest release of the National Accounts
data a few weeks ago, the Department of
Statistics estimated that the performance
of our domestic economy was somewhat
weaker in real terms in 2014 than it had
previously estimated at this time last year.
According to these latest data, the real
economy is now estimated to have contracted by 0.5 per cent in 2014, in contrast
to the estimated positive growth of 1 per
cent presented twelve months ago.
[7]
2016/2017
DRAFT
ESTIMATES
OF REVENUE &
EXPENDITURE