Escaping more prolonged recession
“All those worried about Bermuda’s economy are justified in their concern ... two consecutive quarters of negative economic growth is a ‘big deal’”
— David Burt, May 2017
For a prosperous Bermuda that benefits us all, the economy must be vibrant and industry must be thriving. For the economy to be that way, Bermuda will need significant foreign and local investment. Serious consideration should be given also to a sizeable addition of people living and working here to provide us with this desired economic vibrancy.
Further, for a prosperous Bermuda, we also require a thriving group of entrepreneurs who will build fascinating business enterprises that invite the world to visit us. Bermuda must become the premier Atlantic destination hotspot, not only for North American and European tourists but for vacationers from the Middle East and Far East.
Our tourism net must be spread wider and we should have no tourists returning to their ships or to the airport with money in their pockets. Tourists should be so excited by the creative goods and services on offer that they leave their money here. We can make this happen.
However, the present economic landscape of Bermuda has been revealed to show that we have had negative economic growth for the first quarter of 2018. Most of the economic indicators suggest that we are heading back in the wrong direction. Our domestic business, international business, real estate and retail sector are lacklustre at best and they are not now offering to grow our economy at a pace that is required to be healthy. Therefore, our worry about the economy is increasingly justified.
Understandably, there are issues that prevent our economy from being healthy. Old money is lazy in Bermuda because of complacency and there is a lack of bold and innovative projects to inspire them to put that capital into profitable new ventures.
In addition, those who already feel they can afford to leave prime commercial premises vacant for years. Therefore, local money and resources are competing against the very local start-up potential that can turn around the economy. These vacant premises are dormant energy that can be used as a resource in Bermuda’s goal of returning to a pulsating economy.
Governmental leadership must break this deadlock and incentivise both sides to do what would be best for everyone. Old money must think globally, and this idle power must be released to think creatively as to how it can enhance Bermuda’s potential.
An important way to helping to improve our economy is to unleash the power stored up in Bermudian entrepreneurs and the local resources available here. Our existing businesses should become more imaginative and more energised. Additionally, more resources need to be engaged into tapping our natural resources for economic trade.
Further, our tourism product needs to continue to be revitalised to attract more tourists from near and far. This increase will provide more foreign exchange to rise the fortunes of those who sell goods and services in this market, and will swell the Government’s coffers as well.
Another critical piece to the improvement of our economic fortunes for the island is through banking reform. I have spoken about this in a previous opinion piece.
At present, banks here have no mandatory supervision regarding the interest rate, which leaves them to be seen to be serving only the interests of their shareholders and not the broader community.
So, while the community could be at the brink of survival, having to decide whether to pay for medication, food or electricity, local banks are making record profits.
This is the reason why there is a central bank in many countries: to make economic decisions for the good of the country. If there was an equivalent here, with enforcement power, it would have the ability to compel banks to lower their interest rates so that more money is available in the economy when the economy needs this boost.
Bermudians lived through the six-year recession with no downward movement in the interest rate while other nations’ banks lowered their interest rates to almost 0 per cent to keep their economy stimulated. Most of these economies were out of the recession in a year or two because their central banks moved in to address the money supply.
Ironically, now that the world’s interest rates are rising, so are ours.
There should be reforms to the banking industry before the grim economic news comes home to roost. This should become a priority for this government.
Another economic improvement would occur if government spending was increasingly pushed towards public-private partnerships to build profitable endeavours that offset our debt obligations.
Of course, government spending must not be allowed to outpace revenue. Our debt cannot continue to grow. Government revenue was increasing while spending was decreasing over the past four years. The worrying signs are there to suggest the positive direction the economy was moving in is being reversed.
As I conclude, it is the present government’s responsibility to pursue policies that will bring about a healthy economy. Banking industry reform would be crucial for Bermuda exiting any potential upcoming recession quickly.
The Government should take the lead in incentivising local resources and the entrepreneurial spirit to be conjoined to improve our prospects for foreign exchange and trade. The more money that is in circulation, the healthier the economy will be.
After politics is all said and done, Bermudians want to know the economy is healthy and that when any government has a 25–11 majority, it can provide law or policy that has the potential to benefit the Bermuda economy and its people.
• Vic Ball was a One Bermuda Alliance senator from November 2014 to July 2017