The Central Bank of the Bahamas has undertaken to release monthly reports on economic and financial sector developments in The Bahamas – to provide the public with more frequent information on its economic surveillance activities. The Bank monitors these conditions as part of its monetary policy mandate.

In its most recent report, the regulatory agency reported on the outlook for the economy, noting that the growth momentum observed during the last month of 2004, is expected to increase in 2005. The economic activity had *“firmed modestly during December, with further strengthening in private consumption expenditures supported by a comparative upturn in consumer lending, and robust construction activity upheld by significant reinsurance inflows and firmer growth in residential mortgages”.*

In 2005, the Central Bank predicts more inflows from foreign investments and tourism, with the external sector correspondingly more supportive of expansionary domestic credit conditions.

**International Ratings**

Standard & Poor’s Ratings Services recently it affirmed its ‘A-‘ long-term and ‘A-2’ short-term sovereign credit ratings on The Bahamas, ranking the outlook on the country’s long-term ratings as stable. Credit Analyst Olga Kalinina said this reflects The Bahamas’ track record of macroeconomic and political stability, economic prosperity, and its low and declining public sector external indebtedness. *”New tourism investments planned for 2005 and beyond, as well as improvements in financial regulation and supervision, should boost the future prospects of the tourism and financial sectors,”* Ms Kalinina noted.
Moody’s Investor Services also reaffirmed its A3 Sovereign Credit Rating on The Bahamas in January.

**Economic Growth**

Prime Minister the Rt. Hon. Perry Christie, who also serves as Minister of Finance, said recently that every indicator points to 2005 as being a banner year for economic growth for The Bahamas. *”Tourism arrivals throughout The Bahamas are up, despite the two natural disasters of 2004. Construction, which we truly feel will become the third pillar of the economy, is surging. Personal spending is increasing and the financial services sector is showing good signs.”* Pointing to the introduction of a series of new products and services, he expressed great confidence that financial services *”will continue to grow on an upward path and will continue to provide high-level job opportunities for qualified Bahamians.”*

Post the hurricane season in 2004, GDP growth estimates were downgraded by the UN’s Economic Commission for Latin American and the Caribbean (ECLAC), but remained positive at 1-2%. ECLAC estimates for 2005 are that GDP growth will exceed 3%.

Sen. the Hon. James Smith, Minister of State for Finance, supports the view that the moderate economic growth occurring in the local economy over the past year will be followed by sustainable growth and development. This outlook, he said, is based on the expected continued growth in the U.S. economy as well as the continuation of the low inflationary climate with a rate of about 1.69% in The Bahamas. He acknowledges, however, that the economic outlook for The Bahamas this year and beyond is heavily dependent upon the performance of the U.S. economy on one hand, and the absence of any global catastrophes and/or natural disasters on the other. US Treasury Secretary Snow maintains that the US economy is “very strong, very healthy” (4% GDP growth in 2004) with the unemployment rate down to 5.2 percent, real after-tax income up by over 11% since the end of 2000, and household wealth at an all-time high. Additionally, US inflation, interest rates, and mortgage rates remain at low levels and homeownership rates are at record highs.

Finance Ministers and Central Bank Governors in London recently for G7 meetings noted that although growth has moderated somewhat, the global economy is expected to sustain a broad-based expansion going forward. The Forum discussed the importance of not only keeping respective financial houses in order, but also of promoting and achieving economic growth; these two issues are inextricably linked. The World Bank predicts global GDP growth of 3.2% in 2005 and 2006, following 4% growth in 2004. The United Nation’s Department of Economic and Social Affairs also reports that continued recovery of the world economy resulted in unusually widespread growth in 2004, with just a modest deceleration expected in 2005.