Government is not worried about the balance of payments deficit, said Finance Minister Eugene Cox in the House Wednesday.

Addressing his House colleagues on the economic outlook, Mr. Cox said that given the economic downturn in the United States and the impact of the September 11 attacks, the two quarter deficit was to be expected.

"Those who peddle `gloom and doom' disrespect the innate intelligence of our people. Because Bermudians `save for a rainy day', our foreign currency reserves are strong and the two-quarter deficit on the balance of payments is not a worry at this time."

But he assured the House that Government will keep an eye on the balance of payments and, if warranted, take action to protect Bermuda's foreign currency reserves.

On other economic indicators, the Minister reported that visitor arrivals are down four percent over last year and that "below average" hotel occupancy rates are expected for this summer. But he said that the projections are better than forecast in the last budget.

"Bermuda's insurance industry has continued to perform well with several companies enjoying strong growth in second quarter earnings," he continued.

"Based on this performance Government expects that the international business sector will meet the forecast six percent growth in local expenditures."

He added that the number of exempted companies registered here was now at 12,772. "Notwithstanding the `cut and thrust' of developments on Capitol Hill in Washington D.C, the outlook for Bermuda's vital international business sector is both positive and promising."

Construction was also looking up, Mr. Cox said. "Construction activity now has a broader base with significant investment in residential developments, hotel refurbishments an government projects in addition to the historically strong commercial office sector."

And Mr. Cox said that the rate of inflation, which has been declining steadily over the last three months, is expected to remain "relatively modest" in the near future.

But Bermuda residents have been spending less off the Island, Mr. Cox noted. And, while the total value of retail sales have gone down generally, retailers focussed on the local market have had a "moderate increase in revenues," he said.

"It is expected that group business in the hotels and an increase in cruise ship passengers will strengthen retail sales during the remaining summer months."

The Finance Minister added that "the public purse is in good hands and the long term prospects for Bermuda's economy are encouraging".