Job losses, business closures push GDP negative again
Bermuda's economy officially recorded negative growth for a fourth straight year in 2012.
Last year saw a 1.4 percent decline in the Gross Domestic Product, which was equal to $5.5 billion, the Department of Statistics said.
Adjusted for inflation, our real GDP declined a steep 4.9 percent in 2012, following -3.3% in 2011, -2.1% in 2010, and -5.3 % in 2009.
As well, after factoring out economy-wide inflation, GDP in constant dollars fell from $5.1 billion in 2011 to $4.8 billion in 2012.
With inflation, Bermuda's GDP fell -3.4% in 2011, -1.1% in 2010, 5% in 2009; and grew 3.6% in 2008.
One economic analyst we spoke to said that the drop in GDP was worse than expected and could mean Bermuda's average ten-year growth rate is now essentially zero.
“Out of some 220 countries I see, only four had worse real GDP growth than Bermuda in 2012: Puerto Rico, Greece, Anguilla, and South Sudan.”
A statement from the Statistics Department said: “Continued job losses and business closures adversely affected production, leading to the fourth consecutive year of negative growth.
“Ten of the fifteen industries experienced lower economic activity, with the strongest impacts felt in the manufacturing, construction and electricity generation industries.
Overall, the decline in economic growth translated into a 1.6 percent fall in GDP per capita which was measured at $84,381 per person in 2012.
In 2012, average price levels as measured by the selected basket of goods and services in the
Consumer Price Index (CPI), increased 2.4 percent.
On the other hand, average price levels for all
goods and services produced in the economy (economywide inflation) as measured by the GDP
implicit price index (IPI) increased 3.7 percent.
International business activity recorded growth for the first time since 2007.
The transport and communications industry rebounded from four years of decline.
Activity in the transport and communication industry increased 1.1 percent, marking the first increase since 2008.
This performance was due mostly to a 2.3 percent increase in the value added
from communication activity, where establishments were successful in raising revenue and simultaneously cutting costs.
The transport sector saw activity slip 1.6 percent below last year's level. A marginal increase in the value of goods imported to the Island did not translate into higher demand for cargo handling and freight transport services. The value added for cargo handling fell 5.4 percent while freight transport by road declined 4.8 percent.
Wholesale & retail trade industry experienced its fourth year of decline.
Value added in this industry decreased $9.6 million or 2.5 percent in 2012.
The decline was primarily due to reduced activity in the sale, maintenance and repair of motor vehicles (-10.6 percent) and retail trade and repair services (-4.8 percent). Motor vehicle retailers continued to struggle despite sales and promotions designed to increase revenue.
The closure of a vehicle retailer in addition to job losses contributed to sales of motor vehicles reaching a sixteen-year low.
Business engaged in maintaining motor vehicles also experienced a decline of 20.4 percent in activity.
The sale of building materials fell 13.6 percent as construction activity continued to decline.
Retailers of fuel reported reduced output of 3.1 percent, while the output of food retailers declined 1.2 percent due partly to the closure of a supermart.
Other notable declines were experienced in the sale of computers (-10.9 percent), the sale of specialised products such as jewellery (-10.9 percent) and the sale of household appliances (-2.4 percent).
Conversely, the sale of pharmaceuticals improved 7.5 percent.
Closures of establishments in the wholesale and retail trade industry led to 395 fewer jobs at the end of 2012.
Shortage of new projects hurt construction activity In 2012, construction activity fell 11.8 percent to $180 million.
The completion of major construction projects and a decline in large projects coming on line adversely
The total value of new construction projects started fell by 64.7 percent, with major projects like the King Edward Memorial Hospital redevelopment dominating construction activity in 2011.
Businesses engaged in various areas of construction activity experienced declines in
nominal contribution to GDP.
The value added for companies that do excavation work dropped 19.2 percent. Companies that build complete structures saw activity slip 0.4 percent while completion of finishing work and installation decreased 24.4 percent. The drop in demand for construction services led to 292 fewer workers being employed in the construction industry in 2012.
Public administration recorded a 2.9 percent increase in value added, primarily reflecting a decline in the cost of producing public goods and services.
The value added from education, health and social work services increased 2.9 percent.
The rising cost of health services pushed the economic contribution of health institutions to its highest level on record.
In contrast, education and social work fell by 1.7 and 1.5 percent, respectively.
Economic activity related to community, social and personal services fell 1.5 percent due to declines in recreational activity and domestic services provided to households.
The value added from real estate and renting activities decreased marginally 0.4 percent, as commissions for private sector realtors dipped below last year's earnings. Businesses involved in
financial intermediation (commercial banks and insurance companies) experienced negative growth of 3.5 percent, which reflected a similar decline in interest received by banking institutions.
Output in the manufacturing industry declined for the fourth consecutive year, while the agriculture industry, and electricity and water industry also recorded declines of 5.8 percent and 11.3 percent, respectively.
* Analyst's source: http://en.wikipedia.org/wiki/List_of_countries_by_real_GDP_growth_rate