Rising inflation is proof positive that Bermuda's economy is not as strong as the Government claims, according to Opposition Leader and Shadow Finance Minister Grant Gibbons.

And he said that rising inflation, which The Royal Gazette reported yesterday hit a 12-year high of 3.8 percent for September, was making Bermuda less competitive in tourism and international business.

"I think it gives us the conclusion that the economy is not as stable as the Minister (of Finance) has said in the last few weeks," said Dr. Gibbons, adding that this, combined with poor balance of payment figures announced last week due to a "dismal" tourism sector and a slowing growth in international business showed a less than rosy economy.

In his half-yearly analysis of the economy given two weeks ago, Finance Minister Eugene Cox said that the economy was still on track - despite the multi-million dollar price paid for the clean-up of Hurricane Fabian.

He said that despite the huge cost of Hurricane Fabian, a forecast drop in visitor numbers (and therefore visitor spending) and inflation expected to stay at 3 percent until the end of the fiscal year, the economy was still doing well.

Mr. Cox also said that real gross domestic product would increase by between 1 and 1.5 percent - in line with earlier Government predictions.

But Dr. Gibbons said yesterday that the rising rate of inflation should be ringing alarm bells when it came to the economy.

"We are getting less competitive for the tourist sector and international business compared to other jurisdictions," said Dr. Gibbons explaining that every US dollar, pound or euro would now not go as far in a place that had high inflation.

Dr. Gibbons said that the rate of inflation would not be so worrying if the rate was a one-off, but there had been a growing trend this year of the numbers rising, reaching 3.4 in August and now 3.8 in September.

And the rates of inflation in the United States, Canada and Europe, where most tourists and business come from, was still much lower, making Bermuda a much more expensive destination for businesses and holidaymakers.

Dr. Gibbons said he fears that the rate will continue to rise as the cost of construction rises in the wake of the devastation caused by Hurricane Fabian.

And this in turn will push up the cost of living - and will mean that when wage negotiations come around, residents are going to be looking for higher salaries to pay for living in Bermuda - also adding to the inflationary increases.

Dr. Gibbons also said that he was worried about the Island's seniors who lived on fixed incomes who would find their dollars stretching less and less.

"Every dollar you take home will be worth less," he said.

"People who are really affected are people on fixed incomes like the seniors. Not only have they not gotten their increased pension promised in August, but pensions will not go as far."

In January this year, inflation rose in to the 3 percent bracket, dipped back down to 2.9 and 2.8 percent in February and March respectively and then started rising again.The year to September the average rate of inflation has been 3.2 percent.

On Friday Government released figures that showed that inflation leapt to 3.8 percent for September. Inflation has not been this high since August 1991, when it stood at 4.3 percent.

The upward movement was mainly attributed to a huge hike in the cost of education which pushed the overall cost of living up.

The cost of local private school fees went up in September by 11.8 percent - a fact which was attributed to in part higher operational expenses.

Fees at overseas colleges and universities also jumped by 7.3 percent and the cost of recreational lessons such as piano and computer, also rose by 3.7 percent.