Economy contracts but minister says island still on ‘a good trajectory’
Bermuda’s economy contracted by 1.7 per cent in the second quarter of this year, according to the latest statistics.
But Jason Hayward, the Minister of the Economy, said that the figures were distorted by “increased inflationary pressure”, and that Gross Domestic Product actually increased by 2.2 per cent “in current prices”.
Comparing figures to the same three-month period last year, Mr Hayward said that consumer spending increased by 4.9 per cent to $771.5 million.
Consumption of services increased by 5.3 per cent, which was attributed to rising accommodation costs.
Employment income increased by 9.4 per cent, with hotels, restaurants and international business all reporting increases in employee remuneration, according to Mr Hayward.
Not surprisingly, tourism showed further signs of recovery with air arrivals up almost three times on 2021 levels when Bermuda was still in the grip of the Covid-19 pandemic. There were 48,646 air visitors in the second quarter of the year, up from 16,935 in 2021.
Air visitor spending also tripled, from $31.2 million to $97.8 million.
Consumption by the Government increased by 3.3 per cent because of higher employee salaries and overheads.
Bermuda’s trade with non-residents resulted in a $237 million surplus, which was down by $76 million.
Mr Hayward said the decrease was due to the external balance of goods and services decreasing by 17.2 per cent as a direct result of increases in imported goods and services by 19.1 per cent.
There was bad news for the construction industry, with investment falling 4.4 per cent, but business registrations increased by more than 3 per cent. A total of 258 new businesses registered here in the second quarter.
Despite the lack of growth, Mr Hayward insisted that the island’s economy was “trending positively” and was on “a good trajectory”.
Jason Hayward was short on specifics when it came to tackling soaring inflation.
Inflation figures showed that, while overall inflation was up by 4.7 per cent in the 12 months since August 2021, some sectors hit double figures. Food prices rose by almost 10 per cent and the fuel and power sector shot up by more than 15 per cent.
But the minister was unable to say how or when inflation would be reigned in.
He said: “The global economic environment is one of uncertainty. I don’t think we can predict when supply chain issues will be resolved, we can’t predict the prices of food.
“We are experiencing high inflationary pressure. That issue will continue for some time until that issue abates worldwide.”
Earlier this year the Government cut import fees on gasoline, allowing prices at the pump to remain fixed.
Asked if the Government could step in to cut the cost of electricity, Mr Hayward replied: “There are certain industrial sectors that are driving the inflation rate and I think that it’s important for us to look at each of those sectors and see what’s behind the inflation numbers to see if any policy measures can be put in place to reduce the inflationary pressures in those areas.
“What you can see is the Government utilise fiscal policy during the budgetary period to try to ease some of the pressures that individuals are experiencing, both businesses and residents.
“I don’t want to pre-empt the pre-Budget report that will be coming out of the Ministry of Finance but you should see a fiscal policy which is in alignment.”
But in a press conference yesterday that was short on detail, the minister was unable to provide progress reports on any number of economic recovery plan initiatives or say how and when inflation would be tackled.
He said: “We are still on a good trajectory. If you listen to the economic indicators that I did roll off, the majority of them show that the economy is trending in the right direction.”
Mr Hayward said that the Government would continue to “facilitate the expansion and sustainability of Bermuda’s economy” and “create an environment that encourages economic growth while providing opportunities for Bermudians”.
He added: “We will continue to execute on our economic growth and development strategy that is ensuring that we continue to have business retention and expansion in our local economy and ensure that we continue to market Bermuda as a reputable business jurisdiction so that we can continue to attract businesses and for businesses on the island to continue to thrive in our economy.”
Mr Hayward said that the Government was still developing a strategy to increase Bermuda’s population as a way of boosting the economy – a goal that the Government first announced in the 2020 Throne Speech.
Earlier this year, Mr Hayward said the Government needed to get an estimated 8,418 extra people working at a rate of 1,684 additional workers, or a 5 per cent annual increase, over five years.
He said: “The Ministry of the Economy and Labour will do full rounds of consultation over the next several weeks and months to ensure that we have a strategy in place to increase the working population – one that all stakeholders can accept and one that the entire country can collectively move towards.
“It is our desire to increase the working population. We are formulating a strategy. We will do full consultation and once that consultation is completed, we will publish that strategy for the entire community.”
When pressed, he said that the strategy could be implemented early next year.