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GDP fall confirms second year of recession

Bermuda’s economy shrank for a second successive year in 2010, Government figures revealed yesterday.

The Island’s Gross Domestic Product (GDP) fell 0.7 percent, or 1.9 percent when adjusted for inflation, to $5.76 billion from $5.81 billion in 2009.

Following on from the five percent contraction the economy suffered in 2009, the decrease was not as sharp as expected, but it does confirm that the Island suffered a second successive year of recession.

International business production fell for a third successive year, while construction experienced its sharpest decline for 10 years. Retail and transport and communications also saw declines.

There were some areas of growth, however, as the hospitality industry rebounded from its rock-bottom levels of 2009 and public-sector output also rose.

The decline in economic growth meant the GDP per capita fell below $90,000 for the first time since 2006, to $89,282. Only Luxembourg can boast a higher figure, according to World Bank rankings.

In a statement on the GDP figures, the Ministry of Finance said the data “confirmed that in 2010 the Bermudian economy was still struggling to overcome the adverse effects of the global recession of 2008-2009 as the majority of sectors in the economy suffered declines”.

The Ministry added: “It is satisfying that accompanied by the steadying performance of the financial intermediation sector, the tourism sector exhibited strong growth in 2010. This bodes well for the economy as a whole because the indicators for 2011 are also solid.

“Notwithstanding some of the difficult economic challenges of the period, it is important that everyone in the community work together and Government stay the course with its plan to support jobs and economic growth as indicated in the recent Speech from the Throne.”

Gross value added by international business declined by $17 million to $1.46 billion in 2010, impacted by companies moving their domicile out of Bermuda, job cuts and insurance claims from natural disasters. But the sector remains the main pillar of the Island’s economy, directly contributing more than a quarter of GDP.

At the end of 2010, there were 558 fewer international companies registered and 144 fewer jobs available in the sector.

The production of accounting, legal and management services also dipped 3.6 percent to $558.1 million, as the impact of the 1.2 percent shrinkage in international business took effect.

Financial intermediation, mainly banking, whose production plummeted more than 27 percent in 2009, increased 2.2 percent to $700.7 million in 2010.

The public administration experienced a two percent increase in economic activity, due to pay rises for its 4,296 workers.

Production in the hotel and restaurant sector rose 6.5 percent to $269.5 million, 4.7 percent of GDP. Although fewer hotel rooms were sold in 2010, there was an increase in occupancy rates. And the contribution of restaurants rose 1.9 percent, on an estimated $12 million increase in spending by visitors.

Real estate and renting activities, which makes up 15.7 percent of GDP, contributed $906.6 million, an increase of 5.2 percent from 2009. However, realtors saw an 18.6 percent drop in business that the statement from the Department of Statistics attributed to an excess of supply of properties for sale.

Construction slumped almost 18 percent to $260.5 million, following on from its 14.7 percent contraction in 2009. The collapse in construction demand has meant the sector contracted by nearly 30 percent in the course of two years from its 2008 peak.

The value of new construction projects started fell 20 percent to $156.6 million, and there were 446 fewer people employed in the sector by the end of the year.

Wholesale and retail sector also saw shrinkage, its production falling 1.5 percent to $413 million, or 7.1 percent of GDP. Retail sales in most sectors plunged throughout the year and the sector shed 94 jobs in 2010.

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Published November 25, 2011 at 1:00 am (Updated November 25, 2011 at 6:42 am)

GDP fall confirms second year of recession

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