Bermuda’s economy set to shrink by up to 12.5% this year: Minister of Finance
Bermuda’s economy will contract by between 7.5 percent and 12.5 percent in 2020 due to the impact of COVID-19, according to Curtis Dickinson, Bermuda’s Minister of Finance.
The projection comes from the Ministry of Finance, in partnership with the Caribbean Regional Technical Assistance Centre (CARTAC). Before the pandemic, the 2019 economic review had predicted economic growth of between 1 percent and 2 percent in 2020.
Dickinson stressed the projection is preliminary, saying: “It is important to note that this is a preliminary projection, is based on reasonable assumptions and is primarily dependent on how long intensive suppression measures remain in force.”
As at April 15 Bermuda had confirmed 24 new cases of COVID-19, 23 of which were associated with an outbreak at the care home Matilda Smith. It takes the total number of confirmed cases on the island to 81, of which 33 have recovered and nine remain hospitalised. To date, there are five confirmed fatalities in Bermuda connected with COVID-19.
However, David Burt, Bermuda’s Premier, warned that Bermuda “cannot let the economic effects of this pandemic be worse than the health effects of this pandemic.”
He said: “I believe in bottom up economics and it is the small business owner who hires two or three others who will need ongoing support as we transition from this pandemic into a fully operational economy.”
Burt said Bermuda’s government has created an online forum allowing members of the public to share suggestions, including laws they would like to see modernised, reformed or introduced, or initiatives that could stimulate a future economic recovery.
The government will welcome any creative ideas the public may have about how Bermuda can overcome the significant challenge of opening up its economy, once shelter in place restrictions are eased.
Dickinson warned COVID-19 will have implications for the 2020/21 budget. “The combination of lower fiscal revenues, and higher public spending, will no doubt cause the projected budget deficit of $19.8 million to increase,” he said.
Outlining the state of Bermuda’s finances, Dickinson noted Bermuda had raised its debt ceiling by $150 million, to $2.9 billion, during the final sitting of the House of Assembly. Bermuda’s net debt currently stands at $2.68 billion, leaving the government with approximately $220 million of borrowing capacity, he said.
He added that the Ministry of Finance has arranged a $20 million credit facility with a local financial institution, and is in the process of finalising another $150 million in loans from other local financial institutions.
By April 17 the government expects to have paid benefits to just over 5,000 Bermudians, at a total cost of approximately $8 million. It has provided increased emergency funding of $2.8 million to the Ministry of Health to fund things like personal protective equipment and testing kits, while an additional $450,000 has been provided to the Ministry of National Security to protect troops and provide quarantine facilities.
A further $171,000 has been provided to the Ministry of Public Works, Ministry of Legal Affairs and Department of Information and Digital Technology for other COVID-19 matters.
Dickinson said: “During the global financial crisis, the deepest contraction in the Bermuda economy was 5.6 percent in 2009. The 2009 recession was the most severe one to have affected Bermuda since the 1930s. In line with most other countries, we expect the contraction in the Bermuda economy in 2020 to be worse than in 2009, due to COVID-19. The Ministry is in the process of getting economic modeling done by independent parties.”
