Is Bahamas approaching a "Thunderball" moment with an election occurring during a Covid wave?
Most of the action in the James Bond movie “Thunderball” occurred in The Bahamas, where after two movies there, actor Sean Connery chose to live for the rest of his life. The term "Thunderball" refers to the mushroom cloud seen during the testing of an atomic bomb. Thunderball Grotto, shown in the movie, between Staniel Cay and Pig Island in the Exumas, is an impressive underwater cave system full of exotic marine life, bright colored coral, and hidden entrances.
The Grotto is a nice metaphor for both the advantages and disadvantages of The Bahamas. A few years ago, a former Eastern Caribbean Island Prime Minister told me that “foreign direct investment is our exports.” I have mulled this remark ever since, as from an economist standpoint it is obviously wrong. However, while it may not have been correct for his own Island, there is perhaps some truth in the case of The Bahamas.
This is because The Bahamas is composed of 700 islands and 2,400 cays, many of which are uninhabited, or have very few people, outside the main population centers of Nassau and Freeport. They are therefore rich in natural resources, meaning blue water, land and white sand beaches, relative to the small size of their population (Barbados has a similar population but is a very small Island), and most importantly, they are extremely close to the United States (unlike Barbados). They are in that sense a “lucky” country, both as a tourist destination and attractive to the global elite due to their water and beaches, and because of their zero income tax system. In short, it does not require a lot of management to keep things stable, unlike some other Caribbean countries. In practical terms, the question we will begin to ask is whether The Bahamas may be able to muddle through for longer than Jamaica or the Barbados now that they have reached the level of around 90% debt to GDP. Both Jamaica and Barbados managed to do so for roughly a decade after reaching the point where debt sustainability began to be a serious concern, in 2000 and 2008 respectively, before reaching unsustainability near 150% and around 170% debt to GDP in 2010 and 2018, respectively. In my view, The Bahamas is in any case not yet anywhere near the point where debt sustainability is a serious concern, although this could become an issue during the life of the next government if no changes are made.
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