Bermuda's Gross Domestic Product (GDP) grew by 4.6 percent during 2008, according to the latest figures released by Government, as the economic crisis began to take effect.

The Department of Statistics report revealed that GDP, which measures the total value of goods and services produced on the Island, was almost half the growth achieved the previous year (8.8 percent), with financial intermediation, professional business services and construction activity seeing the biggest increases in value added, but this was offset by a decline in international business activity.

When adjusted for inflation, the growth in economic activity was effectively flat at 0.7 percent compared to the US, Bermuda's largest trading partner for both goods and services, which experienced real GDP growth of 1.1 percent.

Last year, average price levels of a basket of goods and services in the Consumer Price Index rose 4.8 percent, however average price levels or economy-wide inflation for all goods and services in the economy as measured by the GDP implicit price index were up 3.9 percent.

Following the double-digit growth for the past four years, the value added for the international business sector slipped three percent in 2008, with softening insurance rates the main reason behind the decrease, while high catastrophe claims from Hurricanes Ike and Gustav, combined with weak investment returns, also adversely affected bottom lines and performance-based compensation for employees.

Output in the business services sector, including computer, accounting and legal services advanced 12 percent, with the output of the financial services industry expanding 11.1 percent as an increase of 253 international business entities creating a higher level of demand for banking services and lower lending rates attracted more business as an extra $600 million in loans was granted last year versus 2007.

But the value added of the hotels and restaurants trade dropped 3.8 percent below the 2007 level and marked the first fall in the past five years as a dismal tourist season in the second half of 2008 translating into lower revenue for hotels and when combined with the increased cost in business, hotels suffered a 25 percent drop in value added.

Meanwhile restaurants boosted their value added by 13 percent, with hotels and restaurants collectively accounting for 5.1 percent of the total GDP in 2008, down from its 7.9 percent shares one decade ago.

Elsewhere real estate and renting entities weathered the sub-prime crisis and excess supply in the residential sales and rentals markets to record a 6.1 percent growth in output in 2008.

One area to prosper was construction, where activity increased 16.7 percent (11.8 percent in real terms) despite a significant downturn in the global economy and the higher cost of building materials, with new work valued at nearly $400 million being put in place last year, giving rise to the creation of 57 new companies and 105 extra jobs.

Companies engaged in building completions and installations derived from the boom in activity as most projects were past the initial ground-breaking and nearing the final stages, however outlays for residential development and hotel construction abated over the year.

Value added in the wholesale and retail trade also advanced 2.2 percent in 2008, well below the 6.6 percent growth in 2007, with food, fuel, computer and office equipment retailers reporting the largest sales gains. However, after adjusting for inflation, the output for the sector fell by 1.6 percent, allied to the fact that only 12 new jobs were added in the industry last year.