US improvement set to benefit Bermuda

By added on 22/04/2010

A strengthening US economy is likely to help Bermuda’s economy and balance of payments this year, Finance Minister Paula Cox said yesterday.

Last year’s plunge in the current account surplus was a reflection of difficult economic circumstances in Bermuda and beyond, The Royal Gazette has reported.

A plunge in investment income was a key factor in last year’s drop in receipts, she added, and she anticipated improvement this year.

“The money flows and the final current and capital account positions of Bermuda’s balance of payments in 2009 reflect the difficult economic circumstances of the year,” Ms Cox told The Royal Gazette.

“Bermuda and most of the rest of the world was in recession in 2009. Economic activity was depressed. The balance of payments which captures the essence of our economic relations with the outside world reflected those patterns of economic activity. Ministry of Finance anticipated a reduced current account surplus in 2009.

“There was a contraction in payments going out, but there was an even sharper deterioration in incoming receipts. For example, investment income receipts fell from $803 million in 2008 to $311 million in 2009, a decline of some 61 per cent. I consider that this negative movement was a telling factor in the overall outcome on the current account balance.

“But that is history now and my sense is that there is relatively more interest in how the global capital and investment markets are shaping up in 2010 and the likely implications for Bermuda.”

Ms Cox also drew encouragement from comments made Dr. Lawrence Chimerine, the former chief economist of Chase Econometrics, at a Capital G’s private wealth conference in Bermuda last week.

“He talked about the ‘half-speed’ recovery in the US, namely, that the US economy is growing in real terms at an average annual rate of some three per cent,” Ms Cox said. “Not as robust as previous recoveries but very likely to be sustained. Dr. Chimerine also pointed to data showing increases in factory orders and upticks in consumer confidence and spending.

“You may ask what does this have to do with Bermuda’s balance of payments? Well, the US is Bermuda’s largest trading and commercial partner. Bermuda exports services to the US and imports goods and services from the US, all of which is reflected in our balance of payments.

“It stands to reason therefore that a stronger US economy in 2010 will have a beneficial impact on Bermuda’s economy and our balance of payments.”