Buoyant business sector offsets tourism slump By Sue Stuart 2.9 percent GDP predicted for 2001 Registered companies up 10 percent 94 new insurance companies domiciled Tourism arrivals fall by 7,000 A prediction of a slow down in the growth of the Bermudian economy was given by Finance Minister Eugene Cox as he presented the Island's new budget and tabled the Economic Review for 2000 in the House of Assembly yesterday.

"Over the last few years Bermuda's economy grew at a strong and steady rate, above the 10-year trend rate of 2.8 percent,'' he said.

"Growth in real GDP -- gross domestic product -- was recorded at 3.2 percent in fiscal year 1998/99, followed by a 3.3 percent increase in 1999/00. For the present fiscal year GDP growth is estimated at 2.9 percent.

Mr. Cox explained, "Rapid expansions of domestic capital investment and international business expenditure have been primary engines of Bermuda's economic growth. Tourism, while suffering a long term decline, has also been a major contributor.

"Price levels have been relatively stable and should continue to remain flat, barring any sharp increases in oil prices. Over the next year these fundamentals are expected to continue to characterise the economy.'' The Economic Review produced by the Ministry of Finance said that although the economy remained stable in 2000 there was a shift in the contributions made by the various sectors to this continued growth.

International business was the largest contributor accounting for 2.3 percent of the total 3.3 percent growth realised.

This is larger than the annual contribution to GDP growth made by this sector in the 1990s. But the decline in tourism and increase in imports tended to depress GDP.

Data from the Registrar of Companies on the number of new company registrations demonstrates how rapidly the international business sector is growing.

The number of companies on the register at the end of September 2000 showed an increase of 10 percent over the previous 12 months, to reach 12,261.

Company, partnership and permit applications made to the Bermuda Monetary Authority (BMA) were up 54.5 percent in the second quarter of 2000, and collective investment schemes also grew with an increase in total net asset value 35.5 percent higher than the previous year.

Ninety-four new insurance companies were added to Bermuda's register during 2000 and improvements in market conditions during the year were accompanied by a rise in reinsurance prices of at least 15 percent.

Consumer expenditure grew but slower domestic demand suppressed growth in imports, which had been surging in previous years.

After a short period of retrenchment in 1998/99, the international business sector strengthened and that sector's expenditure grew by 10.2 percent to reach $878.4 million.

Capital investment also helped expansion of the economy, with gross capital formation rising to $413.2 million, reflecting the Island's active construction industry.

Above average inflation was reported in the household, transport, education and health sectors and the Consumer Price Index (CPI) -- ranged between 2.3 and 3.0 points during the year.

There was a drop of 377 filled vacancies for the year, which compares sharply with the previous year's growth of 2,526 filled vacancies.

Bermuda continues to earn significantly more foreign exchange than is needed to pay for its consumption of foreign produced goods and services.

The balance of payments current account surplus for the first three quarters of 2000 totaled at $182 million.

The major contribution to this surplus came from the professional, managerial and international business sector, tourism and investment income also produced sizable contributions.

Tourism arrivals dropped in 2000 by around 7,000 to approximately 543,000.

However the dramatic decline in the number of air visitors was partially offset by an increase in the number of cruise passengers (aircraft arrivals fell by 22,000 while cruise ship arrivals increased by 15,000).

The concern for the tourism industry lies mainly with the comparative spending of each. Surveys conducted by Government show that air visitors spend an average of $1,235 during their stay, but cruise ship visitors spend only an average of $217.

compared to the previous year.

Prior to April 1999 the rate of inflation for several years was around 2.0 percent. For 2000 it increased at an annual average rate of 2.7 percent, the rise largely reflecting the rise in oil prices in 1999.

Another large surplus in the current account of the balance of payments is predicted for the year 2000, it being already $182 million in surplus after calculation of the first 3 quarters of the year.

Substantial and increasing amounts of foreign exchange continue to be earned through international business activity.

CHART International Business Registrations Number on register at end of 3rd