Bermuda's economy will see moderate growth in 2006 led by continued growth in the international business and construction sectors as well as an anticipated heightened level of economic activity in tourism, Finance Minister Paula Cox said yesterday in the 2005 Economic Review.

Based on these factors, the Minister of Finance forecast that the Bermuda economy will expand by 2.75 to three percent in 2006.

Real growth in Gross Domestic Product (GDP) for 2005 has been provisionally forecast in the range of 2.5 to 3 percent.

The Island's rate of inflation averaged 3.1 percent in 2005 due to increased prices in fuel and power, education, recreation and reading and transport and vehicle sectors. Minister Cox said if costs such as health and personal care expenses and the price of oil remain relatively low, the level of inflation should hover around three percent during 2006.

Such a relatively low level of inflation will play an important role in maintaining economic health in the near future, Minister Cox said yesterday.

Government's revenue estimate for fiscal 2005/06 of $750 million is likely to be exceed by some $48 million, the Finance Minster said.

Government expenditure, both capital and current for the same fiscal year is estimated to amount to $138 million and $725 million respectively. The revised capital numbers are in line with the budgeted figures while the revised current account expenditures are expected to come in at $14 million over the original estimates. Based on revised estimates of total expenditure and revenue for fiscal 2005/2006, the overall deficit is expected to fall to $64 million from $98 million. Cash at hand will reduce the borrowing requirements to approximately $44 million, said the Minister.

The current account surplus was estimated at $523 million at the end of September 2005 which represents an increase of $74 million over the corresponding period in 2004.

With real GDP growth in the US predicted at 3.6 percent and world growth anticipated at 2.6 percent in 2006, "indications are that Bermuda's economy should continue to grow at a moderate rate," Minister Cox said.

The continued strength and potential for growth of the international business sector will be a positive influence as will the construction industry with an expansion in jobs and significant new work put in place.

Preliminary results from the 2005 employment survey show the total number of jobs in Bermuda rose 1.2 percent to 38,815 compared to 2004. The construction industry recorded the greatest increase, gaining eight percent to 3,503 jobs in 2005. The Minister said the sector's growth helped support GDP and also helped absorb the loss of hospitably related jobs. and it is expected to "remain vigorous in the near to medium term future."

The international business sector also had a robust 2005 with an additional 181 companies added to the register and employment growth of 3.3 percent. That sector's growth, Minister Cox said, will have a positive effect on Bermuda's local business services and financial intermediaries.

Anticipated increases in employment income should also provide "sufficient stimulus" for a sustained rise in household consumption of consumer goods and services. Based on returns filed, The Office of the Tax Commissioner estimated that employment income rose by 5.1 percent to a total of $2.52 billion for the 12 month period ending September 2005.

The Minister said there was also reason for optimism in the tourism sector due to the Department of Tourism's revamped marketing strategy coupled with growth in the US economy since the majority of visitors originate from the US. More discount flights and increased capacity from the UK and Europe and another strong cruise season bode well for the economy as a whole, the minister said.

"The anticipated heightened level of economic actively in tourism would provide additional jobs in the hotel and restaurant sector, transportation services sector and be a boost for the retail industry," the Minister said.