Coalition of Private Sector Organizations Press Release, 6th August 2002

For Immediate Release: Tuesday, August 6th, 2002
For Additional Information Contact:
Brian Nutt, Bahamas Employers Confederation

A survey of businesses conducted during the month of June by the Coalition of Private Sector Organizations, an umbrella group of private sector organizations, shows that the overall economy of The Bahamas, while showing very marginal signs of rebounding, remains highly vulnerable and any marginal gains can easily be reversed.

The objectives of the sections of the survey that addressed business performance and the general economic outlook sought to measure the extent to which changes in the economy have affected and will affect employment, sales, pricing and capital spending, and to provide an indication of business confidence in the near future.

Most employers (60%) held the line on reducing staff. While 40% reduced their workforce, only 8% reduced it significantly.
Almost two-thirds (65%) of businesses reported sales were down, with one-third reporting sales being down significantly. 19% reported that sales were up, with 3% reporting significant increases.
Profits were down for most businesses (64%) with 31% reporting profits being down significantly. 13% reported profits were up.
More than half of the businesses surveyed (56%) reduced capital spending, while 26% reduced capital spending significantly. 22% reported increased capital spending, with 2% increasing capital spending significantly.
Competitive factors along with sluggish sales forced one-third of businesses to reduce prices, while on the other hand increased costs forced 18% of businesses to increase prices.

Approximately one-third (34%) of businesses expect to reduce their workforce, with 4% anticipating significant reductions. 10% expect to take on additional employees.
Almost half (47%) of businesses expect sales to stay down while 24% anticipate sales to increase.
Just over half (51%) of the respondents project profits to be down with 20% expecting profits to be up. The remaining 29% anticipate no change in profit levels.
Businesses are cautious about capital spending with 51% reporting that capital spending will be down. 20% plan to increase capital spending.
Competitive factors along with continued sluggish sales will force 25% of businesses to reduce prices, while increased costs will force 19% of businesses to increase prices.

Business confidence is not high with most in a restraint mode with regard to capital spending, a clear indicator of future economic activity. Based upon submitted comments, a "wait and see" attitude appears to be prevalent in most businesses.

More than one out of five businesses (22%) expect to show a net loss this year with 64% of those who foresee a profit predicting it will be lower than anticipated. 11% expect profits to be higher than anticipated.

The number of businesses that expect a net loss for the year and those anticipating profits lower than projected is troubling as this indicates that many businesses do not have the capacity to absorb additional shocks, having little or no equity reserves.

The fragility of the economy and of business confidence is underscored by the fact that sales and profit projections were already adjusted downward by most businesses a year ago and fell even lower than those downward projections. In a similar survey conducted by the Coalition of Private Sector Organizations in August, 2001, 51% of the businesses surveyed anticipated a decline in profits while 31% expected them to remain the same and 18% projected an increase.

As for the general economic outlook, 85% of businesses indicated that the terrorist attacks in the U.S.A. on September 11th 2001, is still impacting our economy. Nearly two-thirds (65%) believe our economy is recovering, however 35% believe the economy has not yet started to recover.

Most employers (91%) indicated that changes in the Financial Services sector have negatively impacted the economy over the last twelve months and 85% believe the economy will continue to be negatively impacted over the next twelve months.

This survey paints a very sobering picture. With tourism as our major industry, and with the majority of tourists who visit our shores being American, our economy rides on the coat-tails of the U.S. economy. Although confidence in the U.S. is high as it relates to consumer spending, indicating that their economy is recovering, the current tumble of the U.S. stock market will no doubt extend the time it will take for recovery to be made, pushing back economic recovery in The Bahamas.