Bermuda College economist Craig Simmons has predicted that Government will have to make tough decisions, as revenues have fallen.

Yesterday the Minister of Finance confirmed that revenues for the first five months of 2009/2010 were down $14.9 million compared to what Government projected in the Budget.

This is on top of the fact that 2008/2009 saw Government revenues fall by three percent, or $32 million.

Mr. Simmons spoke to Bermuda Public Services Union (BPSU) members on the state of the economy.

This year the union decided to have Government economists and Mr. Simmons explain how Bermuda was faring financially in order to help members better understand the road ahead.

Yesterday, Mr. Simmons pointed out: "Government will not have the luxury of windfall tax revenues and businesses and consumers will not have easy access to credit.

"For the first time in recent memory, politicians and the business community will have to make decisions without the benefit of an economic cushion.

"The silver lining to this grey outlook is that there will no longer be the problem of too much money chasing too few goods.

"The excesses of the last decade were clearly unsustainable. They drove property prices to dysfunctional levels and marginalised working class Bermudians, whose real incomes have declined."

During his presentation he said unlike other countries Bermuda was not showing signs of recovery and there are a number of hurdles in the way of a recovery for the Island.

"Most serious is the deterioration of our foreign currency position," he said. "The last time our foreign currency position, as measured by the current account of the balance of payments, was in deficit was in 1990, during the last recession."

Another issue the Country is facing is declining house prices. Mr. Simmons said the housing market bubble gave Bermudians a false sense of wealth.

"As a community, we borrowed heavily against our new-found housing wealth," he said. "The watershed year was 2005.

"Prior to 2005, Bermuda dollar deposits exceeded the sum of loans and mortgages. Since then borrowing has exceeded Bermuda dollar savings.

"The shortfall has been made up by borrowing foreign currency — principally US dollars. Foreign currency borrowing has grown from $256 million in 1990 to $1,200 million in the first quarter of 2009, according to a June 2009 Bermuda Monetary Authority regulatory update."

Mr. Simmons said he also believed that because the Island's GDP does not distinguish between expatriate and locals earnings, it does not give a clear picture of how Bermudians are doing in this current economic climate.

"GDP does not distinguish between incomes earned by Bermudians and non-Bermudians," he said. "It is therefore possible for Bermudian employment or incomes to decline and for GDP to rise.

"This in fact has been happening over the last ten years. Bermudian employment has declined by over 900 jobs since 1999, whilst total employment numbers have risen by over eight percent.

"It is important for policymakers and politicians to understand the indicators that appear on their economic dashboard. GDP is arguably not the best indicator of how Bermudians are faring."