The Bahamas - Economy

Overview: The Bahamas is among the wealthiest countries in the Caribbean region. With independence in 1973, the country freed itself from the UK’s exchange-control legislation and set up an offshore banking and investment industry; it is now a significant financial centre and ship registry, the third largest in the world in terms of gross tonnage registered, after Panama and Liberia. Since 1717 there has been virtually no tax on individuals or companies. Government revenue is raised through a range of excise duties and fees.

The country does, however, need to import most of its foodstuffs and consumer goods, and is strongly influenced by the economic climate in the USA, not least because the majority of its tourist visitors are from that country.

From the early 1990s, facing severe recession, the government introduced an economic reform programme which emphasised fiscal responsibility, privatisation of government-owned hotels, investment promotion, infrastructure development and diversification of the economy. From the mid-1990s, as the USA came out of recession, this resulted in a long period of good growth with modest inflation, becoming strong growth in 1999 and 2000.

The economy stalled in 2001–02, reflecting the downturn in the USA and consequent fall in tourism. Good growth and modest inflation resumed in 2003–06, the growth rate rising to 4.5% in 2007. In 2007 tourism and related activities accounted for about one-third of GDP, and the financial sector, including a dynamic offshore centre, more than 20%.

Trade: Main exports are machinery and vehicles, chemicals, refined petroleum, crawfish, fish and rum. Main imports are machinery and vehicles, manufactured goods, food, fuels and chemicals. Main export partners are the USA, Germany, Spain and France. Main import partners are the USA, South Korea and Japan.

From 2007, when the Cotonou Agreement between the European Union and the ACP grouping of developing countries came to an end, negotiations proceeded on a series of regional Economic Partnership Agreements, to replace the preferential trade agreements of the Cotonou Agreement with WTO-compliant free-trade areas.