Govt running much bigger deficit than forecast
Government revenues plunged nearly ten percent in the third quarter of last year as the flagging economy continued to strangle the inflow of funds into the public coffers.
But during the same July-through-September quarter, Government increased its current expenditure by 4.3 percent to $267.9 million — the first time in six quarters that spending had actually increased.
The figures were released yesterday by the Department of Statistics and show a further deterioration in the state of the countrys finances in the third quarter of last year — and the size of the task facing the new OBA Government.
Alarmingly, the figures show in the first six months of the current budget year (April to June and July to Sept quarters) Government expenditure totalled $560 million, while it collected some $412 million in taxes, fees and other revenues in the same two quarters.
The difference is $148 million.
The Chamber of Commerce economics panel pointed out that these figures indicate that the Government was running a deficit of around $300 million per annum, which is what the Chamber has been saying all along whereas the budget speech indicated a deficit of $172 million.
It means that the country is currently borrowing about $300 million per annum just to continue along the path it is on, said Peter Everson, Chamber of Commerce economics committee head. This is why the Chamber stated four years ago that this path was unsustainable and difficult policy changes had to be faced up to.
Chamber president Ronnie Viera added that the organisation had expressed concern about Government spending levels and increasing debt.
We anticipate that the new Government and Finance Minister will begin to address both in the upcoming budget, however we appreciate, as should the community at large, that reversing this trend will not be easy nor quick, Mr Viera said.
One of the primary ways of achieving this is to make the Island more attractive for businesses to set up shop and create jobs. Therefore, changing policies which facilitate that, while not directly financial in nature, will start this process.
The figures also showed that employment income, or money being paid out on wages and salaries in Bermuda, continued to shrink in the third quarter.
It fell a further 3.8 percent to $734 million from July through September, having dropped 5.8 percent in the second quarter to $782 million and 4.7 percent to $872 million in the first quarter.
Breaking down the figures further, it is apparent that in the third quarter of the year alone, from July to September, revenue was $204.1 million, a 9.7 percent drop from the previous quarter with stamp duty showing the biggest fall, plunging 35 percent in the period, and payroll tax falling nearly 10 percent to $80 million. Passenger tax, however, rose by 51.4 percent.
Of the $285 million in total Government expenditure in the third quarter, most — some $115 million — went on wages, salaries and employees.
Wages and salaries rose 2.9 percent in the third quarter, while money spent on grants and contributions jumped 62 percent to $65.3 million.
After the value of new construction projects started in the second quarter of 2012 shot up 675 percent, that value plunged 64 percent in the third quarter to 7.9 million, compared to the 2011 period.
New Minister of Finance Bob Richards plans to hold a news conference tomorrow afternoon regarding the current state of Bermudas finances.