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GDP plunges 15.7% in second quarter of 2020

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A broad measure of Bermuda’s economic activity contracted sharply in the second quarter of 2020, primarily due to the devastating impact of the Covid-19 pandemic.

Gross domestic product, the value of goods and services generated by the island’s economy, plummeted year-over-year by 15.7 per cent when adjusted for inflation to $1.368 billion.

The decline was influenced primarily by double-digit declines in final consumption and gross capital formation due to restrictions imposed on some economic activity as mitigation efforts to reduce the spread of Covid-19.

In contrast, the net surplus external balance of goods and services rose substantially as less money was spent on imported goods and services.

In current prices, GDP decreased by 16 per cent.

Curtis Dickinson, the finance minister, predicted in his pre-budget report that GDP for the whole of 2020 would shrink by seven to nine per cent and that GDP fell by an average of 9.3 percent in the first two quarters of 2020.

The statement also stated that the contraction in GDP in the first quarter had been revised from 2.8 per cent to 2.4 per cent.

Overall inflation for the second quarter fell by 0.4 per cent.

Final consumption fell by 15.1 per cent as both household and government consumption decreased year-over-year, while household final consumption decreased 18 per cent year-over-year to $671.3 million with expenditure on durable goods and services experiencing the largest declines.

For durable goods, spending fell 33.4 per cent with fewer purchases of motor vehicles, furniture and major household appliances.

Spending on services contracted 14.7 per cent with the largest declines recorded for travel-dependent services such as accommodation and air transport. Catering services and personal care services also decreased significantly.

Consumption of non-durable goods fell 6.5 per cent despite large increases in expenditure on food and beverages.

Government final consumption decreased 4 per cent to $203.4 million, which reflected mostly lower payments for employee overheads and other personnel costs.

Gross capital formation, or investment in fixed assets, fell 55.6 per cent to $152.3 million.

Gross capital formation related to construction registered a 40.5 per cent decrease while investment in machinery and equipment fell 66.8 per cent, both reflecting limited investment and restricted economic activity during the second quarter.

The net surplus on trade in goods and services increased 37 per cent to $341 million.

Payments for the imports of goods fell sharply by 48 per cent due to decreases in imported fuel, machinery and equipment.

Imports of services decreased 39.9 per cent as payments for freight transport fell and residents spent less on travel services.

Exports of services were 19 per cent lower as receipts from travel services dipped significantly due to travel restrictions.

Exports of goods fell 41.3 per cent due primarily to less fuel sold to visiting airlines.

See Related Media for a PDF of the second quarter GDP by Expenditure publication from the Department of Statistics.

For more economic statistics go to www.gov.bm/statistical-publications

Fall in GDP: Bermuda’s gross domestic product declined sharply in the second quarter of 2020 (File photograph)

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Published February 16, 2021 at 8:12 am (Updated February 16, 2021 at 8:12 am)

GDP plunges 15.7% in second quarter of 2020

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