Economy suffers deepest contraction in living memory
The economy suffered the deepest contraction in living memory last year, the latest statistics revealed last night.
The 2020 report on Bermuda’s Gross Domestic Product said the economy contracted by 6.9 per cent in real terms as the Covid-19 pandemic and lockdown caused declines in 13 of the 19 business sectors analysed.
The Department of Statistics document included most tourism related businesses.
The hardest hit sector was accommodation and food service, which plummeted by 68.2 per cent.
A separate measure – gross output – which largely measures revenue, saw the same sector drop by $430 million or 60.3 per cent.
The arts, entertainment and recreation sector took a battering.
It shrank by 26.9 per cent and its output was cut by 33 per cent or $20 million.
Construction was also hammered – the sector shrank by 24.4 per cent with output down by $87 million or 17.4 per cent.
The 6.9 per cent contraction was worse than the 2009 post-financial crisis recession which saw the economy decline by 5.6 per cent.
The grim figures marked the seventh time in ten years that the economy has shrunk.
Bermuda has only seen annual economic growth of more than one per cent in one year since 2007 – 2017, when the America’s Cup boosted the economy by 3.3 per cent.
Wayne Furbert, the Minister for the Cabinet Office said: “As the public will appreciate, last year our economy was significantly challenged due to the pandemic.
“Like other countries around the world, Bermuda was not alone in seeing a decline in its annual GDP.
“However, it should be stressed that in response to the pandemic, and to assist individuals and businesses that had an immediate need for financial relief, the Government instituted several emergency measures last year.”
Mr Furbert highlighted the unemployment benefit programme, which gave temporary relief to eligible workers who lost their jobs as a result of public health measures imposed to curb Covid-19.
He added: “Measures taken to assist businesses have included extending deadlines for tax filings and the deferring and waiving of fees, taxes, and penalties.
“Furthermore, payroll tax relief was provided to the restaurant and bar, taxi and hotel sectors, all of which were severely impacted by the stay at home measures that were put in place.
“And to effectively tackle our economic challenges in the long-term, the Government has introduced its Economic Recovery Plan which is well under way.”
Mr Furbert said that the electricity, water supply and waste management sector was among the areas that recorded growth.
The sector went up by 17.8 per cent with cost savings on electricity production.
Mr Furbert said the increase was due to output allied to the falling cost of electricity production, largely because of a plunge in the price of oil over the pandemic, which dropped to a 22-year low.
It has, however, since recovered to 2018 levels.
Mr Furbert added: “International business activity rose one per cent while wholesale and retail trade activity increased 0.7 per cent due primarily to retail sales of food and liquor, which offset lower sales of clothing, fuel, electronic equipment and building materials.”
He confirmed that tourist-dependent industries such as the accommodation and food service industry faced losses, while tourism supporting industries such as the transportation and storage industry felt the knock-on effects of low visitor spending.
GDP per capita at present prices fell by 7.3 per cent to $107,435 at the end of 2020.
Mr Furbert said: “Construction and quarrying activity also saw declines during the second quarter of 2020 due to the public health restrictions in place.”
He emphasised that, despite the problems, the Government was committed to economic recovery.
Mr Furbert said: “In March 2021, the Minister of Finance, Curtis Dickinson, outlined a comprehensive Economic Recovery Plan for Bermuda.
“Preparatory work in Phase 1 involved identifying the objectives, the guiding principles and a preliminary list of initiatives. This work was undertaken in July through September 2020.”
Mr Furbert added: “We are pleased to note that nine of the 31 projects have been completed. Work continues on the others.
“These projects are considered the best programmes aimed at creating economic growth in the short to medium term, while meeting the objective of increasing jobs, diversifying our economy, and enhancing Bermuda’s infrastructure for the future.
“These initiatives will ensure that Bermuda forges a new path to growth, employment and greater equity.”
For more information on the recovery plan, visit https://www.gov.bm/economicrecovery-updates.
The 2020 Annual GDP can be found at https://www.gov.bm/annual-gross-domestic-product.