The Ministry of Finance estimates the economy expanded last year between 4 per cent and 4.5 per cent, driven by growth in international business and tourism recovery.

More twin-pillar growth, together with Bermuda’s Economic Development Strategy, is expected to lead to similar expansion in 2024.

However, the National Economic Report of Bermuda 2023 warns that the Bermuda economy is vulnerable to several external risks, which could hinder growth.

It raises concerns about the effects of tighter monetary policy, despite the calming of global inflation.

Released annually in tandem with the Budget Statement, the report said: “Higher global interest rates have led to tighter financial market conditions, investment, consumption, unemployment, housing markets and economic activity.

“These factors can contribute to a global slowdown in demand, with spillover effects on the Bermuda economy.

“Bermuda has already seen a rise in interest rates, resulting in a tighter domestic financial market, an increase in the debt burden of households and a decline in real consumption.

“The Government’s focus on creating fiscal buffers while balancing the social welfare of the population remains critical in combating any shocks in the near to medium term.

“The Government’s return to a balanced budget and surplus will create the necessary space for any budgetary manoeuvres required.

“While the implementation of policies such as the reduction of payroll taxes for all local businesses and 86 per cent of Bermuda’s workers will create space for businesses, and the population, especially the most vulnerable, to manage the current inflationary, high interest rate, and uncertain environment.

“The continued collaboration between the Government and the private sector will remain critical in 2024 to drive sustainable growth and welfare within Bermuda’s economy.”

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The report said: “Air capacity is expected to grow by approximately 25 per cent with April’s and May’s projected to surpass 2019 levels for the first time since the pandemic began.

“This comes as a result of the successful launch of BermudAir in 2023 and the expansion of services by airlines such as JetBlue, United and American Airlines.

“In addition, more routes are now served to Bermuda than the pre-pandemic era, as not only have old routes been restored but new routes, such as Fort Lauderdale, Westchester County and Azores, have been added.”

The most recent full year estimates for gross domestic product published by the Department of Statistics are for fiscal 2022.

Nominal GDP was reported to be approximately $7.828 billion, reflecting an increase of approximately $541 million above the 2021 figure, putting GDP per capita at $122,253 in 2022.

Adjusted for inflation, real GDP grew by 6.4 per cent — the highest in the past decade — to $6.7 billion, surpassing pre-pandemic levels of $6.5 billion and is the highest level since 2011 of $6.8 billion.

Growth was largely driven by financial insurance activities, international business activities, and accommodation and food service activities.

There were declines in only four of the 19 sectors measured: information and communication; agriculture, forestry and fishing; arts, entertainment and recreation; and, electricity, water supply and waste management.

As expected, international business contributed the greatest amount to Bermuda’s economy in 2022, some $1.92 billion in total output or 28.4 per cent of total GDP. That is a 7.7 per cent increase compared with 2021.

Household personal consumption for 2022 rose 7.7 per cent, driven significantly by expenditures on restaurants and hotels, and secondarily by miscellaneous goods and services.

Those experiencing marginal declines included food, beverages, tobacco and narcotics, and education.

IB drove an estimated 6 per cent increase in employment income for the first six months to June 2023, when compared with the same period in 2022.

For the 12-month period ending June 2023, total employment income was $3.92 billion, or $219.8 million more than the 12-month period ending June 2022.

It led to a positive uptick in the Retail Sales Index – a 3.1 per cent increase in total gross turnover for the first eight months, compared with the same period in 2022.

The motor vehicles sector had the best growth in sales of all sectors at 5.7 per cent on average.

The report said: “During the first eight months of 2023, overseas purchases declared by residents via courier, post office, sea, and when returning to Bermuda via the airport, fell from $217.1 million to $211.1 million year-over-year, representing a $6 million or 2.8 per cent decrease.

“Against the backdrop of increased travel, however, overseas declarations by residents returning to Bermuda via the airport increased by $3.7 million or 12.3 per cent in 2023.

“On the other hand, overseas declarations by Bermudians returning by sea have declined by 0.8 per cent or $0.5 million, while overseas declarations via courier experienced a $9.8 million or a 8.1 per cent decrease when compared to 2022.”

During the first two quarters of 2023, the value of new construction projects was half of what it was the year before.

Surprisingly, 48.2 per cent of construction work was done by the private sector and 51.8 per cent by the public sector, as 31 new housing units were completed in the residential sector.

Both international business and tourism grew foreign exchange earnings during the first six months of last year, as IB employed 4,909 people in 2023, an increase of 215 job posts.

• For more on the 2023 National Economic Report of Bermuda, see Related Media