still some areas of weakness, latest Government figures reveal.

The 1993 Economic Review, released yesterday with the Budget, also showed the recession was "slightly milder than was originally thought''.

Revised figures for Gross Domestic Product show the economy shrank by 0.2 percent in real terms in 1991-1992, not by 2.5 percent as originally thought.

However, the economy continued to shrink in 1992-1993, as increased demand was offset by a big push in imports, meaning GDP fell by 2.2 percent in real terms in the year ending March 31, 1993.

The second half of 1993 revealed greater strength for the economy. Cruise arrivals were up 17.4 percent, air arrivals were up 10.1 percent and visitor spending for the first nine months of the year was up 14.3 percent to $400 million.

The Review predicts growth of 2.9 percent in the 1993-94 year, followed by growth of 2.5 percent to three percent in the coming year -- a sign of steady recovery if inflation remains around 2.5 percent as predicted in the Budget.

By the end of October, unemployment had fallen to 563 people from a high of 1,089 in April and the number of people on Social Assistance fell from 1,259 in April to 790 in October. Job vacancies also increased.

Other positive signs noted in the Review were continued improvement in retail sales volume and further decreases in the rate of inflation -- which was below the US rate for much of the year.

International company cexpenditure also rose in 1992 and incorporations grew at a healthy clip in 1993.

Domestic demand -- which reflects confidence in the local economy -- grew for the first time since 1988-89 in 1992, edging up 0.2 percent in real terms.

Nonetheless, declines in spending in the intervening period were caused by tightening credit, the weakness of the tourism sector and the reduction in the size of the expatriate workforce.

Also contributing to the retail sector's weakness was the continued propensity of Bermudians to spend abroad. While improved Customs procedures were partly responsible for the rises in reported purchases, "there is no doubt that Bermudian households are taking full advantage of lower prices and greater selection of products in the United States which are brought about by the difference in incidence of taxation, lower freight costs and a larger market'', the Review said.

"This trend, which intensified during the recession, poses a serious challenge to the local retail trade,'' the Review said.

Even with the likelihood of improved sales due to higher visitor spending and raised local confidence, the Review predicts that sales per employee are unlikely to return to the levels of the early 1980s in real terms because of the reduction in the size of the workforce.

Also worrying is the continued weakness of the construction sector, the Review said. It predicts that there will be little improvement in residential building -- particularly if the Base lands become available -- although the outlook for commercial space is better.

"However, changes in building techniques and the growing tendency to subcontract many of the specialised tasks would imply that the level of employment in the sector is unlikely to return to the levels witnessed at the peak of the building boom in 1989, when some 2,917 persons were employed in construction.'' The Review also warned that despite the improvement in visitor arrivals, the hotel sector remains weak.

Spending per visitor in nominal terms increased by five percent in 1993 in the third quarter of 1993, the first real increase since 1991 and the number of visitors staying in hotels grew by ten percent in the ten months tot the end of last October.

But total hotel bed nights increased by just 4.2 percent in the same period and gross revenue per room dropped from $314 in 1992 to $308 in 1993 for the eight major hotels.

In the more robust international business sector, spending increased by 5.5 percent in 1992, the majority of which was spent by insurance related companies.

The total rate of decline in jobs in the economy slowed in 1993. Bermudian employment increased by 0.5 percent while non-Bermudian employment fell.

The Hon. David Saul.