Imagine that you are on an airplane cruising at 35,000 feet, and although your flight has experienced some periods of choppiness, you and your fellow passengers remain comfortable and confident.

Then, virtually without warning, you plunge at a terrifying and dizzying speed. Some passengers who don't have their seatbelts fastened securely are hurled to the ceiling. Personal belongings fly all over the place and are lost. People are crying out and even non-believers start saying their prayers.

On the flight deck, the pilots are struggling to regain control of the aircraft. They use every recovery technique in the book to stabilise their aircraft but she is slow to respond, such is the extent of the damage. Then they try desperate measures, not found in the book, and the terrifying plunge starts to ease and the big plane starts to level off – at 200 feet – narrowly avoiding crashing and burning. But she is badly damaged, flying low and slow. It will take a long time and some fancy flying to get the surviving passengers to their destinations safely. But the worst may well be over.

This analogy very aptly describes the economic events of the last 12 months in the USA and the western world. While the terrifying plunge is over, there will be no quick bounce back. In the US, the damage is such that recovery will be slow. The repair required to fix many major institutions, particularly financial institutions but also car companies, will take time to implement. Consumer confidence, a key barometer, has been shaken to the core and as long as people are losing jobs it is not likely to improve much. The unemployment rate, a lagging indicator, is now 9.5 percent and is expected to rise to more than ten percent by year- end before it starts to improve next year.

Personal incomes declined by 1.3 percent in June as personal spending fell by 0.1 percent. The key property market is stabilizing as home sales rose 3.6 percent, up for the fifth straight month as lower prices attracted buyers. The average 30-year fixed rate mortgage is 5.25 percent, marginally greater than record lows set in April.

What does that mean for us here in Bermuda for the second half of this year? While the plunge in the world economy is past, poor consumer sentiment caused by high unemployment rates will mean that our customers are not and will not be in a spending mood. This translates into a continuing poor background for tourist spending. Heavy discounting by hotels and cruise lines will be the order of the day for the second half of this year.

This environment is not encouraging for the prospect of finding investors for new hotel properties either, but at least it is not getting any worse. With all the money being created by the US government, in the long run, the investment outlook will slowly improve, as investors are always focused on the future, not the present. Our responsibility is to ensure we do all within our power to make such strategic investments as economically attractive as possible.

The growth in international business is almost flat. The combination of some restructuring, corporate departures and new buildings has caused a glut in office space in the City of Hamilton. This has placed a downward pressure on rental rates and while office owners will not like this situation, the softening of rates on office space will have the positive effect of making Bermuda more competitive as a domicile for international business.

Our marketing, promotional and lobbying efforts to key decision makers in the US remain the most critical element in our efforts to retain and sustain our number one industry, which continues to be under attack abroad. As the sector that is the principal driver of our entire economy, Government must at this time redouble its efforts to remove impediments, irritants and unnecessary red tape that may cause participants in this industry to consider alternative jurisdictions.

Several of the major projects in Hamilton are winding down now and the construction sector, which was severely overheated 18 months ago, will soon cool down. This is already being felt by many of the smaller contractors. As I warned earlier this year in the Budget Debate, it will be difficult for Government to synchronise its projects to smoothly compensate for job losses in the private sector. But now is the time we should be hearing about the start-up of government projects. So far, I have heard nothing substantial.

In conclusion, the worst in the US is over but anaemic growth for the next year or so appears to be the order of the day. As an economic satellite of the US, we must be prudent in our business dealings, both in the public and private sectors. If we strive to provide the highest-quality services, in whatever endeavour we are engaged in, we will succeed.

Recessions exist as a natural cure to over-doing things: oversupplying, overinvesting, overcharging, overpricing and overspending. The way to survive is to stick to what you know and do it the best you know how, because quality always survives to take advantage of a brighter day.

E.T. (Bob) Richards is the Shadow Minister of Finance