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Central Bank assesses economic impact of Dorian

The Central Bank of The Bahamas has said that although medium-term prospects for The Bahamas are still positive, the unprecedented devastation caused by hurricane Dorian and the disruption in travel itineraries to many airports will negatively impact the economy in the short-term. 

Central Bank of The Bahamas
Friday, September 6, 2019
Friday, September 6, 2019

The Central Bank of The Bahamas as issues the following statement assessing the economic prospects of The Bahamas following the devastation wreaked but Hurricane Dorian earlier this week:

Medium-term prospects for The Bahamas are still positive. However, the unprecedented devastation caused by hurricane Dorian and the disruption in travel itineraries to many airports will negatively impact the economy in the short-term.

Rebuilding efforts in the aftermath of the storm and the return to normal conditions in several tourism markets which were not severely impacted will temper these overall adverse effects. The pace of recovery of hotel room inventory will impact the speed at which the economy returns to normal.

In the coming months, the measures implemented to rebuild and replace vital infrastructure, combined with efforts to assist those residents and businesses adversely affected by the storm, could hamper the government’s fiscal position. However, financing needs are likely to be met in part by inflows from several multilateral lending facilities; thereby mitigating the pressure on domestic funding sources. In the private sector, external re-insurance inflows are anticipated to cushion business and household financing needs; however, recovery gaps are likely for impacted persons and entities without adequate insurance protection.

The hurricane’s near-term impact on external reserves will materialize over the remainder of the 2019 and most of 2020. Balances could still experience a net accumulation in 2019, as re-insurance and other external proceeds are placed on deposit for drawdown during rebuilding efforts. More of the net outflows against reserves are anticipated over the course of 2020, cushioned by the seasonal upturn in performance on other tourism assets. Nevertheless, reserve indicators are expected to remain above international benchmarks.

Given the adverse effects of the hurricane on the economy and the need to support the recovery effort in affected islands, the Central Bank has relaxed lending conditions on facilities extended to distressed households and businesses. For these impacted borrowers, commercial banks will be permitted to waive the Central Bank’s mandated 15 per cent equity or down payment requirement on consumer loans, and to waive the threshold debt service range of 40 per cent to 45 per cent on new credit that accommodates hurricane recovery. In these instances, lending institutions have been encouraged to adopt flexible but prudent credit assessment criteria, tailored to the particular financial circumstances of distressed borrowers.

The Central Bank has also endorsed moderation on collection efforts against delinquent credit facilities of borrowers displaced by the Hurricane, even if such accommodation is tempered from the more aggressive resolution posture that the Central Bank urges more generally. The Bank will continue to closely monitor the situation and take appropriate measures to support the economic recovery and ensure the stability of the financial sector.

The government of The Bahamas has released a statement in the wake of the catastrophic impact of Hurricane Dorian on Grand Bahama and Abaco islands.

Bahamian officials continue to assess the damage in The Abacos and Grand Bahama, the two islands in the Northwest Bahamas that were devastated by Hurricane Dorian. Relief teams are currently deployed and are providing assistance to those in need.

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