Finance Ministry forecasters do not expect Bermuda’s economy to emerge from recession until the middle of next year.The grim prognosis came in the National Economic Report of 2010, which estimates that Bermuda’s gross domestic product (GDP) fell four to five percent last year, against the Ministry’s forecast of 0.5 to one percent growth.In 2011, GDP is expected to contract again, by between 0.5 percent and one percent, “with only a modest recovery likely by the middle of 2012”.This follows the 8.1 percent fall in GDP in 2009, taking inflation into account.“The 2009 recession was the most severe one to have affected Bermuda since the 1930s and the Bermuda economy was adversely affected by economic forces far beyond its control,” the report states.“The higher than anticipated contraction in GDP was largely driven by sharp declines in output in the financial intermediation, international business, hotels and restaurant and the construction sectors.“In particular, the 27.5 percent decrease in output in the financial intermediation sector was extraordinary, which highlights the vulnerability of Bermuda’s small open economy, as external shocks can have quite substantial effects on output as they are magnified throughout the economy.”The report expects 2011 growth in the international business sector to be “less robust than in previous years, but it will still remain as the primary driver of the Bermuda economy”.The Island ended 2010 with 15,091 international companies registered, 558 fewer than a year earlier, representing a fall of 3.6 percent.But the report reflects some more positive signs too, with the net asset value of the Island’s investment funds having grown by 18.9 percent year-over-year to $183.6 billion by the end of the third quarter. The sector appears to be rebounding strongly after a dramatic fall from its pre-crisis high net asset value of $250 billion.The report noted that the Island’s insurance companies showed resilience during these difficult times in terms of revenue, capital and surplus, and the captive sector grew in assets and gross premiums written.The decline of the construction industry was highlighted, illustrated by the huge decreases in the value of work done and work started.During the first three quarters of 2010, work put in place was valued at $135.8 million, down 49.5 percent from the $268.7 million recorded in 2009. The value of new projects put in place plunged by 59.2 percent to $78.2 million, compared to $191.8 million in 2009.Offices, shops and warehouses accounted for nearly two-thirds of construction work carried out last year, with residential projects accounting for about a fifth.The suffering sector will get a welcome boost from the building of the new hospital, the report stated, adding that it will create 300 jobs over the duration of the project.Tourism continued to be badly impacted by the downturn, but air arrivals, down 1.5 percent to 232,262 last year, showed signs of stabilising, the report stated.Cruise ship arrivals increased by 9.2 percent to 347,931, aided by the opening of the new Heritage Wharf cruise ship pier in Dockyard, which can accommodate megaships with a passenger capacity of 3,200 passengers. The report projects the number of cruise ship visitors will increase again in 2011, by 11 percent.Hotel occupancy rates averaged 54 percent an improvement of 5.7 percent on 2009. Major hotels (58.3 percent) did best in filling their rooms, followed by small hotels (52.9 percent), but cottage colonies recorded the lowest occupancy rate of 37.6 percent, unchanged from last year.In its conclusion, the report points out: “Under these circumstances, it is imperative that Bermuda addresses the issue of its competitiveness in key economic sectors.“If everyone in the community is prepared to pull together, Bermuda could then be well placed to take advantage of the eventual upturn in overseas economies, particularly the United States.”In her Budget statement yesterday, Premier Paula Cox noted that stimulus spending was continuing in the US, encouraging growth.“In all likelihood, the Bermuda economy will benefit from this trend, but probably not until next year at the earliest,” she said.