The first official year of the third millennium was an economic roller-coaster ride in which the very heart of the world's financial capital was rocked by the unimaginable events of September 11.

As shock waves spread to already suffering economies around the world, global recession came home and Bermuda's near bullet-proof economy was knocked from its pedestal.

Tourism has continued to slump into the doldrums and economic gloom seemed to be around every corner, but for Bermuda, new hope is rising out of the ashes.

Insurance gurus saw an opportunity following the attacks on the World Trade Centre and the last two months have seen unprecedented growth in international businesses in Bermuda, especially in insurance and reinsurance.

But how will the Island's economy fare in 2002?

The best indication was presented by Government's economic advisor Dr. Andrew Brimmer at a lunch organised by Bermuda International Business Association (BIBA) in December.

Dr. Brimmer was the bearer of bad news and revealed the results of an economic survey carried out by himself and the Ministry of Finance on the implications of the US economy on Bermuda, saying Government expects Gross Domestic Product (GDP) to contract by 0.4 percent in 2001, and to fall even further to minus 1.5 percent in 2002.

Original estimates were for the economy to grow by 2.7 percent during the 2001/2002 period, now it appears the combined effect will be a two percent loss, and Dr. Brimmer warned the figures could be lower.

On tourism, Dr. Brimmer said for 2001 the occupancy rates at hotels are believed to have fallen 20 percent, and may fall a further 15 percent in 2002.

Dr. Brimmer said: "The major factor underlying the downward revision was the sharper than projected reduction in the volume of visitor expenditure for the year.

"Looking ahead to 2002, the overall Bermudian economy is expected to exhibit continuing weakness. As a by-product employment will rise further."

Dr. Brimmer said Government would get $24 million or 4 percent less in revenue in 2002, but spending would increase as more social assistance would be required by Bermudians.

But Dr. Brimmer said the projected revenue shortfall will be partially offset by a series of cost-saving measures including: "A moratorium on non-essential overtime and non-critical furniture and equipment acquisitions. Government travel has also been cut back and a funding freeze has been placed on long-standing vacant posts."

And he said large capital projects, such as the Berkeley Institute would not be stopped and several unnamed capital projects might be started to take advantage of more labour during a recession.

A result of a poor economy, the poor will get poorer and there will be fewer jobs in Bermuda, said Dr. Brimmer and he predicted that if the recession in the US continued into the early months of next year the Island's economy would suffer, particularly in the tourism sector.

"One should expect the effects of the US recession to spill all over the Island. The principal reason is the sharp reduction of travel from the US mainland and the related decrease in foreign visitors' spending. These negative effects are already evident and they are more likely to worsen than to diminish in the months ahead," said Dr. Brimmer.

This news will do little to bolster the flagging morale of retailers and Dr. Brimmer said retails sales are expected to contract 2.2 percent for 2001 and rise only 0.5 percent in 2002. But this does not take on board inflation which is currently running at between 2.8 and 3 percent, which will take the figures down even further.

He added: "If the recession in the United States is deep and lasts longer than projected, the adverse impact on Bermuda will be also be greater than is now anticipated. Under those circumstances, the Government of Bermuda is positioned to adopt counter cyclical measures to ameliorate the effect of the recession on Bermuda's economy."

The Government has been studying worst-case scenarios for the Island's economy should the United States economy not come out of recession in the second quarter according to Dr. Brimmer, but he did not reveal what the contingency plans were, and when questioned, said it was for the Minister of Finance to make any such revelations.

When Finance Minister Eugene Cox was asked what the measures were he declined to reveal details saying that if needed they would be revealed in the budget.

Mr. Cox said of the economic review: "Dr. Brimmer is our economic advisor and I think he gave a comprehensive and well-rounded speech that I think most people will have enjoyed. We got a glimpse of where we are and where the United States is expecting to be and where we are expecting to be next year."