Government seeks to spur economic recovery as some growth predicted from 2023
Bermuda can expect to grow the economy by 2.5 to 4.5 per cent from next year, the Government’s National Economic Report of Bermuda has predicted.
The 2021 report, released alongside the annual Budget statement, said the island could expect an increase in Gross Domestic Product of 1.3 to 1.5 per cent a year above baseline economic growth from 2023.
The report said growth in the island’s economy would be fuelled by the Government’s 31 priority strategies, part of its 81-point economic recovery plan.
The aim is to focus energy and investment on areas with the best prospects of medium-term growth and employment.
Lockdowns, business closures and shelter-in-place regulations in 2020 meant any trade activity in 2021 was a welcome improvement.
But some statistics can only provide a general indication of the trends and GDP is a case in point.
Government provided 2020 figures, the latest available, that showed the economy contracted by 7.3 per cent at present market prices, lopping a half a billion dollars off the 2019 GDP, down to about $6.9 billion.
Bermuda’s GDP per capita, measured at current prices, declined from $115,943 in 2019 to $107,435 in 2020.
When adjusted for inflation, the level of economic activity, or real GDP, fell by 6.9 per cent.
GDP per capita is a measure of a country's economic output per resident – total GDP divided by the population.
It is an important indicator used to make cross-country comparisons of average living standards and economic wellbeing.
But it is problematic for more than one reason. It fails to observe income distribution, especially in a place like Bermuda, where high-paying financial services jobs for a few thousand people in a small population skews statistics.
Also, cross-country comparisons based on the US dollar can be distorted by exchange rate fluctuations and often do not reflect the purchasing power in the countries being compared.
That said, Bermuda’s significant GDP drop still puts us just behind Luxembourg at the top of the heap of the International Monetary Fund’s list of countries based on 2020 nominal GDP per capita.
It was international business that has again kept us from falling completely off the cliff.
The Budget Statement said that since 2019, jobs in international business have increased, with 391 additional posts added to the economy, a growth of 10 per cent.
International business now provides 4,411 jobs and is the single largest economic activity group.
The sector contributed the greatest amount to Bermuda’s economy in 2020 – $1.9 billion in total output or 27.5 per cent of total GDP, up by 3.3 per cent.
It was the ninth consecutive year that the value added by the international business sector increased.
As expected, employment improved in 2021 from the disaster of 2020.
Job creation has pitched up and down – seven consecutive years of job decline from 2009, then four straight years of growth, followed by declines in 2020 and 2021.
Bermuda had a record number of 40,213 jobs in 2008, but has lost 9,000 posts since, a reduction of 22.3 per cent.
The most recent unemployment rate was calculated in the November 2020 Labour Force Survey when the rate was measured at 7.9 per cent compared with 3.8 per cent in 2019.
The unemployment rate for Bermudians alone was higher, estimated at 9.6 per cent.
Preliminary figures from the 2021 Employment Survey indicated that the total number of jobs in Bermuda declined by 1,177 posts from 32,427 in 2020 to 31,250 in 2021, a 3.6 per cent decrease.
Bermudian employment levels declined from 22,750 in 2020 to 21,967 in 2021, which equates to 783 posts or 3.4 per cent.
Non-Bermudians’ employment decreased by a total of 299 posts or 4.1 per cent to finish 2021 with 6,929 positions.
Spouses of Bermudians accounted for an additional 88 job losses or 4.9 per cent to end the year with 1,703 posts.
Jobs in accommodation and food service activity fell by nearly 700 and financial and insurance activities lost 152.
There were smaller losses in construction and quarrying, and information and communication.
As economic activity resumed in 2021, there were minimal gains at the retail level.
Employment grew by six per cent in the first three quarters, raising total gross sales for the same period by 1.7 per cent, with motor vehicle sales experiencing the greatest sales increase.
Clothes stores reopened and less travel meant more on-island spending, driving receipts up by more than 66 per cent. The largest sales growth occurred in April when sales jumped by more than 500 per cent.
Building material stores recorded the next largest growth in sales of all sectors. The sales level recorded in this sector was led by an increase in sales of 380 per cent in April because of more shopping days after the 2020 pandemic restrictions.
The sector also experienced increased demand for home improvement projects and renovations. The average monthly sales growth in this sector was 40.1 per cent.
The only sectors to record fewer sales were food and liquor stores, which experienced average declines in sales of 1.5 per cent and 2.5 per cent respectively in 2021 after a pandemic-fuelled mini-boom the year before.
The balance of payments continued to record relatively large current account surpluses, an important strength in the Bermuda economy.
Bermuda’s total current account surplus over the first three quarters of 2021 was $768 million. The figure was 19.8 per cent greater than the $641 million recorded over the first three quarters of 2020.
The growth in the current account surplus was due in large part to a $212 million or 16.1 per cent increase in the primary income account.
Within the primary income account, employee compensation surged by $134 million over the first three quarters of 2021 – a gain of 11.7 per cent.
There was also a significant increase in the investment income account of $62 million which saw it jump more than five-fold from $11 million in 2020, fuelled largely by reinvested earnings.