BAHAMAS-IMF says the Bahamas’ economy has strengthened in recent years.

WASHINGTON, CMC – The International Monetary Fund (IMF) says The Bahamas’ economy has strengthened in recent years, with a robust post-pandemic tourism sector as the key driver of economic growth and fiscal revenues.

The IMF executive board has completed the Article IV Consultation with Nassau, considering and endorsing the staff appraisal.

According to the IMF, real gross domestic product (GDP) expanded by 3.4 per cent in 2024, and growth remained resilient in the first half of 2025, supported by construction and cruise tourism. It said that the unemployment rate stood at 9.3 per cent in the second quarter of 2025, while inflation decelerated (1.3 per cent in July 2025), partly reflecting lower global energy prices.

The fiscal position continued to improve in the last fiscal year. Driven by tax revenues and expenditure containment, the primary balance remained in surplus, and the fiscal deficit narrowed to 0.5 per cent of GDP in the financial year 2024/25.

The IMF said that growth is expected to be around 2.8 per cent in 2025, then gradually slow to 1½ per cent.

In its appraisal, the IMF executive board said risks to economic growth are broadly balanced, with downside risks including a potential global slowdown and natural disasters, and upside risks entailing greater-than-expected effects of public and private infrastructure projects linked to tourism and the electricity reform. Inflation remains low.

“Additional policy measures are necessary to achieve the authorities’ medium-term target for central government debt. A primary surplus was reached again in the financial year 2024/25, and the financial year 2025/26 budget targets an overall surplus.”

The executive said, while declining, that public debt remains elevated and that, in the future, new revenue-enhancing and expenditure-optimising measures should be prioritised to achieve the authorities’ 50 per cent of GDP target for central government debt.

It said these measures can include introducing corporate and personal income taxes, rationalising tax expenditures, raising the standard value-added tax (VAT) rate, and reducing transfers to state-owned enterprises (SOEs).

The executive board said that these efforts can free up resources to invest more in priority areas, such as education and resilient infrastructure. But the board acknowledged that more work is needed to strengthen fiscal institutions and reduce fiscal risks.

It said an immediate priority should be to improve fiscal reporting and enhance the institutional framework for private-public partnerships (PPPs). The board is also critical to assess and mitigate fiscal risks arising from SOEs accurately.

The IMF executive board said financial sector policies should continue to aim at preserving financial stability.

“Systemic financial stability risks remain moderate. As bank credit to the private sector increases, safeguarding banks’ resilience is crucial, including by monitoring potential risks arising from banks’ sovereign exposure.

“The oversight of nonbanks should be strengthened, and closing data gaps is a priority. Operationalizing real estate price indices remains necessary. Planned legal reforms can help improve resolution frameworks and safety nets. Reducing the ceiling on central bank advances to the government would support the exchange rate peg, and it is essential to maintain efforts to implement the 2024 DARE Act. Actions to enhance risk-based AML/CFT supervision and promote financial inclusion should continue.”

The IMF said that fostering economic resilience and investing in human and physical capital should ease supply-side constraints to growth.

“Policies to raise productivity, together with fiscal consolidation, can help narrow external imbalances, given that the external position is moderately weaker than the level implied by medium-term fundamentals and desirable policies. Ongoing infrastructure projects in hotels and airports can alleviate capacity constraints in the tourism sector.

“To reduce vulnerable employment and lessen informality, it is important to cut red tape for businesses, strengthen education, and continue expanding training and upskilling opportunities.”

The IMF said trade diversification could strengthen economic resilience and reduce import costs, with additional benefits for consumers if coupled with greater product-market competition.