Govt forecasts fifth year of recession

  • Downturn: The Ministry of Finance predicts another year of recession (Photo by Akil Simmons)

    Downturn: The Ministry of Finance predicts another year of recession (Photo by Akil Simmons)


A fifth year of recession is officially forecast by Government in the National Economic Report of Bermuda for 2012, released yesterday.

The Ministry of Finance estimated that Bermuda’s GDP will decline in the region of 1.5 to 0 percent this year and there will be “modest growth in 2014”.

It also expects that our GDP may have contracted by 1.75 to 2.25 percent in 2012 after a decline of 2.8 percent in 2011.

This would be deeper than expected as the last Economic Report estimated GDP would decline one to two percent in 2012.

The report goes on to further state that employment fell by 5.1 percent and the official unemployment rate was calculated at eight percent in 2012.

Momentum that gained in tourism in 2011, when air arrivals increased for the first time since 2007, did not carry into 2012.

“The reality is that 2012 experienced the worst visitor numbers since 2008 when the Island was first hit by the global recession,” the report said. “That was the last time that both air and cruise figures declined in the same year.”

Hotel occupancy rates averaged 55.7 percent in 2012 a drop of 1.1 percent year-over-year.

In the international business sector, jobs declined by 5.2 percent and the number of active international companies registered fell by two percent.

Hotel employment fell by 5.3 percent while air visitors also decreased by 1.7 percent.

One positive result in the economy, the report noted, was the gross turnover generated by retail stores increased by 0.5 percent.

February saw the first increase in retail sales activity since March 2009, and the first growth in the volume of retail sales since April 2008.

All sectors in the RSI recorded declines in sales in 2012 apart from food and liquor stores.

Another piece of good news was the balance of payments continued to record relatively large current account surpluses, an important strength in the Bermuda economy.

Bermuda’s current account surplus was recorded at $496 million at the end of the third quarter of 2012 6.7 percent greater than the $465 million recorded over the first three quarters of 2011.

However employment income was estimated to have declined by 4.8 percent for the first three quarters of 2012, compared with the same period in 2011.

The Department of Statistics estimated that in the first three quarters of 2012 tourism and international business combined to provide at least $1,602 million (excluding financial services) in foreign currency receipts.

The figure represented a 4.2 percent decline, year-over-year. Individually, the amount of foreign exchange earnings produced by the international business sector declined by 2.7 percent year-over-year, with third quarter figures of $1.28 billion. The amount of foreign exchange earnings generated by tourism activity decreased by 9.4 percent, recording earnings of $326.3 million at the end of September.

International business provided 3,867 jobs in the economy in 2012, reflecting a decrease of 5.2 percent year-over-year, or a loss of 210 posts.

There were 14,590 active international companies registered in Bermuda at the end of 2012, a decline of 292 companies or two percent less than the total at the end of 2011.

In the banking sector, total assets of the banks declined by almost $2 billion (or 7.7 percent) during the first three quarters of 2012 (and 2.1 percent year-on-year).

In its 2013 outlook, the report stated: “Since any meaningful economic recovery centres on renewed growth in international business income, the long-term convergence to the historical growth rate of about three percent appears doubtful.”

The report added: “While the outlook for growth over the next year remains negative, the proposed reform measures in the areas of employment, international business, tourism and construction are all expected to have a positive impact on the economy beginning in the second half of 2013 and beyond.”

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Published Feb 23, 2013 at 8:00 am (Updated Feb 23, 2013 at 12:33 am)

Govt forecasts fifth year of recession

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