NASSAU, Bahamas, (CMC) — The International Monetary Fund (IMF) is predicting economic growth of 1.6 per cent for The Bahamas this year following a “prolonged period of stagnation”.

An IMF delegation, headed by Fabian Valencia, a senior economist in the IMF’s Western Hemisphere Department, has ended a one-week visit to The Bahamas reviewing latest economic developments and laying the groundwork for the 2018 Article IV consultation expected to take place in March 2018.

He said that the economy will also grow 2.5 per cent next year on the back of a stronger United States economy, the phased opening of Baha Mar, and foreign direct investment (FDI)-related construction activity.

Baha Mar opened its second hotel in mid-November, creating 3,500 jobs so far, and is on track to open its third and final hotel later in 2018.

However, Valencia said lifting growth in the medium term requires decisive action on structural reforms, particularly in the energy sector and in improving the business environment.

“The expected introduction of a credit bureau — with legislation currently in Parliament — should help improve the private sector’s access to credit and support growth in the medium term,” he said.

The IMF official said that following a sharp increase in the fiscal deficit to 5.8 per cent of GDP in fiscal year 2017, the new Administration has committed to reduce it to sustainable levels and has announced expenditure cuts across the board.

“As noted during the 2017 Article IV consultation, fiscal consolidation should have a strong focus on reducing current expenditure. In addition, turning State-owned enterprises self-sufficient and reforming the public pension system remain critical to ensure long-term fiscal sustainability.

“Introducing an effective fiscal rule, as part of a fiscal framework, should enhance fiscal discipline. A recent successful foreign placement of a US$750-million bond reflects market confidence in the Government’s commitment to fiscal discipline. The placement has also helped strengthening foreign reserves.”

Valencia said that commercial banks remain well capitalised and liquid, adding that non-performing loans (NPLs) declined to 9.5 per cent of total loans as of September, down from 11.3 per cent in June, reflecting mainly a large disposal of non-performing loans (NPLs) by the Bank of The Bahamas. The central bank has also stepped up efforts to encourage banks to speed up the resolution of remaining NPLs.

“Strong compliance with anti-monetary laundering and counter financing of terrorism (AML/CFT) and tax transparency standards should help mitigate the withdrawal of correspondent banking relationships and safeguard the integrity of the financial sector.

“The planned addition of continuous AML/CFT supervision; the planned development of a permanent AML analytics unit; and the recent signing of the OECD’s Multilateral Convention on Mutual Administrative Assistance in Tax Matters are welcome steps in this direction,” he added.