The Bahamas’ economic freedom score is 64.5, making its economy the 69th freest in the 2020 Index. Its overall score has increased by 1.6 points due to a much higher score for property rights. The Bahamas is ranked 13th among 32 countries in the Americas region, and its overall score is slightly above the regional and world averages.
The Bahamas’ economic freedom score has declined significantly over the past decade, and an economy that was firmly in the mostly free category for many years is now entrenched in the ranks of the moderately free. This decline has been accompanied by stagnant economic growth.
The islands’ economy was shattered in 2019 by Hurricane Dorian, and the rebuilding process, though daunting, provides opportunities for enhancing openness and the rule of law, which would help to ensure greater robustness and higher standards of living in the future.
BACKGROUND
Prime Minister Hubert Minnis of the Free National Movement was elected to a five-year term in 2017. He continues to benefit from his party’s strong position in the legislature, which will help him in the multiyear rebuilding effort that lies ahead in the wake of a devastating Category 5 hurricane that struck the northern Bahamas in September 2019, causing an estimated $7 billion in damage. Tourism accounts for more than 60 percent of GDP. Financial services are also important. Debate continues regarding how to replace the tariff revenues that could be lost if the Bahamas joined the World Trade Organization. Proximity to the U.S. makes the Bahamas a transshipment point for illegal drugs and human trafficking.
RULE OF LAW
The Bahamas’ score for ease of property registration in the World Bank’s 2018 Doing Business report remains low (169th out of 190 countries). Contracts are enforced by the independent legal system, which is based on British common law. The judicial process is inefficient and time-consuming, although steps are being taken to improve it. Money laundering and corruption are problems at all levels of government.
GOVERNMENT SIZE
The government imposes national insurance, property, and stamp taxes but no income, corporate income, capital gains, or wealth taxes. The overall tax burden equals 17.9 percent of total domestic income. Government spending has amounted to 20.5 percent of the country’s output (GDP) over the past three years, and budget deficits have averaged 3.8 percent of GDP. Public debt is equivalent to 61.0 percent of GDP.
REGULATORY EFFICIENCY
The process for resolution of business disputes can be very time-consuming. The system for filing and paying value-added taxes recently became simpler, and access to credit has been improved. There is a shortage of skilled and unskilled labor. Although subsidies to state-owned Bahamas Air dipped slightly in 2019, health care subsidies rose by 20 percent.
OPEN MARKETS
The total value of exports and imports of goods and services equals 75.5 percent of GDP. The average applied tariff rate is 18.6 percent. Emergence of a more dynamic and sustainable private sector has been held back by nontariff barriers and an inefficient investment framework. The diversified banking sector remains stable, but the number of nonperforming loans has increased.
QUICK FACTS
The Bahamas’ economic freedom score has declined significantly over the past decade, and an economy that was firmly in the mostly free category for many years is now entrenched in the ranks of the moderately free. This decline has been accompanied by stagnant economic growth.
The islands’ economy was shattered in 2019 by Hurricane Dorian, and the rebuilding process, though daunting, provides opportunities for enhancing openness and the rule of law, which would help to ensure greater robustness and higher standards of living in the future.
BACKGROUND
Prime Minister Hubert Minnis of the Free National Movement was elected to a five-year term in 2017. He continues to benefit from his party’s strong position in the legislature, which will help him in the multiyear rebuilding effort that lies ahead in the wake of a devastating Category 5 hurricane that struck the northern Bahamas in September 2019, causing an estimated $7 billion in damage. Tourism accounts for more than 60 percent of GDP. Financial services are also important. Debate continues regarding how to replace the tariff revenues that could be lost if the Bahamas joined the World Trade Organization. Proximity to the U.S. makes the Bahamas a transshipment point for illegal drugs and human trafficking.
RULE OF LAW
The Bahamas’ score for ease of property registration in the World Bank’s 2018 Doing Business report remains low (169th out of 190 countries). Contracts are enforced by the independent legal system, which is based on British common law. The judicial process is inefficient and time-consuming, although steps are being taken to improve it. Money laundering and corruption are problems at all levels of government.
GOVERNMENT SIZE
The government imposes national insurance, property, and stamp taxes but no income, corporate income, capital gains, or wealth taxes. The overall tax burden equals 17.9 percent of total domestic income. Government spending has amounted to 20.5 percent of the country’s output (GDP) over the past three years, and budget deficits have averaged 3.8 percent of GDP. Public debt is equivalent to 61.0 percent of GDP.
REGULATORY EFFICIENCY
The process for resolution of business disputes can be very time-consuming. The system for filing and paying value-added taxes recently became simpler, and access to credit has been improved. There is a shortage of skilled and unskilled labor. Although subsidies to state-owned Bahamas Air dipped slightly in 2019, health care subsidies rose by 20 percent.
OPEN MARKETS
The total value of exports and imports of goods and services equals 75.5 percent of GDP. The average applied tariff rate is 18.6 percent. Emergence of a more dynamic and sustainable private sector has been held back by nontariff barriers and an inefficient investment framework. The diversified banking sector remains stable, but the number of nonperforming loans has increased.
QUICK FACTS
- Population:
- 0.4 million
- GDP (PPP):
- $12.6 billion
- 2.3% growth
- 0.6% 5-year compound annual growth
- $33,494 per capita
- Unemployment:
- 11.9%
- Inflation (CPI):
- 2.2%
- FDI Inflow:
- $942.8 million
