Economy of the Bahamas

Theeconomy of the Bahamasis dependent upontourismandoffshore banking.The Bahamasis the richest country in theWest Indiesand is ranked 14th in North America for nominal GDP.It is a stable, developing nation in theLucayan Archipelago, with a population of 391,232 (2016). Steady growth in tourism receipts and a boom in construction of new hotels, resorts, and residences had led to solid GDP growth for many years. The slowdown in theEconomy of the United Statesand theSeptember 11 attacksheld back growth in these sectors from 2001 to 2003.
Financial services constitute the second-most important sector of the Bahamian economy, accounting for about 15% of GDP. However, since December 2000, when the government enacted new regulations on the financial sector, many international businesses have left the Bahamas. Manufacturing and agriculture together contribute approximately 10% of GDP and show little growth, despite government incentives for those sectors. Overall growth prospects in the short run rest heavily on the fortunes of the tourism sector, which depends on growth in the United States, the source of more than 80% of the visitors. In addition to tourism and banking, the government supports the development of a "2nd-pillar", e-commerce.
The Bahamian economy is almost entirely dependent on tourism and financial services to generate foreign exchange earnings. The Gross Domestic Product (GDP) of the Bahamas is approximately $5.7 billion with tourism accounting for 50%, financial services nearly 20% and the balance spread among retail and wholesale trade, fishing, light manufacturing and agriculture.The European Union lists the Bahamas as one of several Caribbean "uncooperative jurisdictions" because it fails to meet tax fairness and transparency benchmarks.
Tourism alone provides an estimated 51% of thegross domestic product(GDP) and employs about half the Bahamian workforce. In 2016, over 3 million tourists visited the Bahamas, most of whom are from theUnited StatesandCanada.
A major contribution to the recent growth in the overall Bahamian economy is Kerzner International's Atlantis Resort and Casino, which took over the former Paradise Island Resort and has provided a much needed boost to the economy. In addition, the opening of Breezes Super Club and Sandals Resort also aided this turnaround. The Bahamian Government also has adopted a proactive approach to courting foreign investors and has conducted major investment missions to theFar East,Europe,Latin America, andCanada. The primary purpose of the trips was to restore the reputation of the Bahamas in these markets.
Financial services constitute the second-most important sector of the Bahamian economy, accounting for up to 17% of GDP, due to the country's status as an offshore financial center. As of December 1998, 418 banks and trust companies have been licensed in the Bahamas. The Bahamas promulgated the International Business Companies (IBC) Act in January 1990 to enhance the country's status as a leading financial center. The Act simplified and reduced the cost of incorporating offshore companies in the Bahamas. Within 9 years, more than 100,000IBC-type companies had been established. In February 1991, the government also legalized the establishment ofAsset Protection Trustsin the Bahamas. In December 2000, partly as a response to appearing the plenaryFATF Blacklist, the government enacted a legislative package to better regulate the financial sector, including creation of a Financial Intelligence Unit and enforcement of "know-your-customer" rules. Other initiatives include the enactment of the Foundations Act in 2004 and the planned introduction of legislation to regulatePrivate Trust Companies. After being later off the blacklist,in December 2020 Bahamas also was taken offthe FATF greylist.
Agricultureand fisheries industry together account for 5% of GDP. The Bahamas exports lobster and some fish but does not raise these items commercially. There is no large scale agriculture, and most agricultural products are consumed domestically. The Bahamas imports more than $250 million in foodstuffs per year, representing about 80% of its food consumption. The government aims to expand food production to reduce imports and generate foreign exchange. It actively seeks foreign investment aimed at increasing agricultural exports, particularly specialty food items. The government officially lists beef and pork production and processing, fruits and nuts, dairy production, winter vegetables, and mariculture (shrimp farming) as the areas in which it wishes to encourage foreign investment.
The Bahamian Government maintains the value of theBahamian dollaron a par with theU.S. dollar. The Bahamas is a beneficiary of the U.S.-Caribbean Basin Trade Partnership Act(CBTPA), Canada'sCARIBCANprogram, and the European Union's Lome IV Agreement. Although the Bahamas participates in the political aspects of theCaribbean Community(CARICOM), it has not entered into joint economic initiatives with other Caribbean states.
The Bahamas has a few notable industrial firms: the Freeport pharmaceutical firm, PharmaChem Technologies (GrandBahama) Ltd. (formerly Syntex); the BORCO oil facility, also in Freeport, which transships oil in the region; theCommonwealth BreweryinNassau, which producesHeineken,Guinness, andKalikbeers;andBacardi Corp., which distills rum in Nassau for shipment to the U.S. and European markets. Other industries include sun-dried sea salt in Great Inagua, a wet dock facility in Freeport for repair of cruise ships, and mining of aragonite—a type of limestone with several industrial uses—from the sea floor at Ocean Cay. Other smaller but more nimble players in the banking industry include Fidelity Bank (Bahamas) Ltd. (FBB) and Royal Fidelity Merchant Bank & Trust Limited (RFMBT). FBB offers a wide range of innovative banking products including loan products with built-in savings plans. RFMBT is the only merchant bank in the Bahamas and is a joint venture with Royal Bank of Canada. It provides investment products and services and attracts the majority of the corporate business deals in the Bahamas, most recently acting as financial advisor and placement agent for the largest initial public offering (IPO) ever in the Bahamas with the IPO of Commonwealth Brewery, a Heineken subsidiary.
The Hawksbill Creek Agreement established a duty-free zone in Freeport, the Bahamas' second-largest city, with a nearby industrial park to encourage foreign industrial investment. TheHong Kong-based firm,Hutchison Whampoa, has opened acontainer port in Freeport. The Bahamian Parliament approved legislation in 1993 that extended most Freeport tax and duty exemptions through 2054.
The Bahamas has no income tax, corporate tax, capital gains tax, or wealth tax. Payroll taxes fund social insurance benefits and amount to 3.9% paid by the employee and 5.9% paid by the employer.In 2010, overall tax revenue was 17.2% of GDP.Avalue-added tax(VAT) of 7.5% has been levied 1 January 2015. It then increased from 7.5% to 12% effective from 1 July 2018.
The following table shows the main economic indicators in 1980–2017.
The Bahamas has the 47th freest economy in the world according toThe Heritage Foundation2010Index of Economic Freedom. The Bahamas is ranked 7th out of 29 countries in the South and Central America/Caribbean region, and its overall score is higher than the regional and world averages. Total government spending, including consumption and transfer payments, is relatively low. In the most recent year,government spending was 23.4% of GDP.