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Covid-19: too many variables on economy

The focus must remain on the possible human impact, not the economic cost, of a potential killer strain of coronavirus, the Ministry of Finance said yesterday.

The spokeswoman added that the possible hit to Bermuda's economy from Covid-19 was still unclear.

She said: “The efforts that must be exerted to prevent deaths is most important, not the economic effects of a pandemic, even if it means losing a percentage of the GDP for less than half the year.”

The spokeswoman added that the Government had “taken steps” to ensure the health ministry had cash for protection equipment.

She said: “However, we currently do not have an estimate of the dollar impact to the local economy as there are so many unknowns at this point.”

The spokeswoman explained that a reduction in tourism around the world “would potentially have the highest impact” on Bermuda's service-based economy.

She explained: “These are the people that stay in hotels, guesthouses and vacation rental properties, eat out at restaurants and purchase goods to take back home with them.

“There is also the loss of hotel occupancy tax and cruise ship passenger taxes that we would not be able to recover during the year.”

The spokeswoman said that Covid-19 could also mean a decline in domestic productivity due to people being off work.

She added: “The impact on quarterly GDP will be based on the number of workers that are out sick.”

However, the spokeswoman said: “It should have little impact on annual GDP because productivity will rise once a cure is found and people get back to work and make up for the time they were out sick working overtime.”

She added that the island could also see a slowdown if people spent less time in public places such as bars, restaurants, and even hair salons and barber shops, which would hurt the sectors. The spokeswoman concluded: “What is essential is that we all work together and that the banks recognise their role, do not force firms into bankruptcy and cut their interest rates to protect the Bermuda economy from the negative economic impact from the coronavirus.”

The island's big three banks are HSBC, Butterfield and Clarien. A spokesman for HSBC Bermuda said the bank worked with customers in difficulty to find “pragmatic solutions based on their individual circumstances”.

“If any customers are facing challenges because of the global outbreak of Covid-19, they should contact the bank to discuss.”

The Government last week asked banks to cut their base rates of interest after the US Federal Reserve cut its benchmark interest rate by 50 basis points to a range of 1 per cent to 1.25 per cent.

The spokeswoman said at the time that the virus had hurt global business. The spokeswoman added: “Bermuda will not be immune from this impact and we therefore all need to work together in order to get through the economic challenges ahead.

“A reduction in local banks' base lending rates, in line with the Fed's action, will go a long way towards helping us weather this impending storm.”

Potential threat: A nurse wears protective gear in a ward dedicated for people infected with the new coronavirus, at a hospital in Tehran, Iran. Bermuda's Ministry of Finance said that the possible hit to Bermuda's economy from Covid-19 was still unclear. (AP Photo/Mohammad Ghadamali)

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Published March 11, 2020 at 9:00 am (Updated March 11, 2020 at 7:33 am)

Covid-19: too many variables on economy

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