2015 Index of Economic Freedom

The Bahamas

overall score68.7
world rank41
Rule of Law

Property Rights70.0

Freedom From Corruption71.0

Limited Government

Government Spending83.2

Fiscal Freedom97.8

Regulatory Efficiency

Business Freedom68.9

Labor Freedom75.3

Monetary Freedom78.8

Open Markets

Trade Freedom52.2

Investment Freedom30.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 0.4 million
  • GDP (PPP):
    • $11.4 billion
    • 1.9% growth
    • 0.4% 5-year compound annual growth
    • $32,036 per capita
  • Unemployment:
    • 13.6%
  • Inflation (CPI):
    • 0.3%
  • FDI Inflow:
    • $1.1 billion
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The Bahamas’ economic freedom score is 68.7, making its economy the 41st freest in the 2015 Index. Its overall score has decreased by 1.1 points, with notable declines in financial freedom and labor freedom offsetting improvements in freedom from corruption and monetary freedom. The Bahamas’ overall score continues to be higher than the regional and world averages, and its economy is the 4th freest out of 29 countries in the South and Central America/Caribbean region.

Over the past half-decade, economic freedom in the Bahamas has improved by 0.7 point despite score declines in the past two years. Gains in economic freedom have been led by strong improvements in freedom from corruption and trade freedom, which have advanced by 16 and 10 points, respectively. More modest improvements have occurred in monetary and fiscal freedoms.

Despite some improvement, corruption remains a problem, and regulatory inefficiency continues to hold back the economic dynamism that should result from the competitive financial sector and a tax regime with no personal or corporate income tax. Ultimately, it is the government’s ability to promote more broad-based reforms that will determine the prospects for a long-term and diversified economic expansion.

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Background

In 2012, Prime Minister Perry Christie and his Progressive Liberal Party won a five-year term. The Bahamian economy centers on tourism, international banking, investment management, and financial services, with tourism accounting for more than 60 percent of GDP. While accession to the World Trade Organization would be a positive step, politicians and the private sector are locked in a dispute about how to replace the revenues that would be lost. Due to its geographic location just 50 miles off the coast of Florida, the country is a major transshipment point for illegal drugs, particularly shipments to the U.S. and Europe, and is used for smuggling illegal migrants into the U.S.

Rule of LawView Methodology

Property Rights 70.0 Create a Graph using this measurement

Freedom From Corruption 71.0 Create a Graph using this measurement

Corruption remains a problem at all levels of government and may be exacerbated by a reported increase in cocaine transshipment through the Bahamas in 2014. Ongoing concerns include money laundering and allegedly extensive nepotism, cronyism, and favoritism in government. The largely well-functioning legal system, based on British common law, is independent, but the judicial process tends to be very slow. Property registration is difficult and time-consuming.

Limited GovernmentView Methodology

The Bahamas imposes no individual or corporate income taxes and has one of the world’s lowest tax burdens. Government revenue, which equals 15 percent of the domestic economy, is reliant on tariffs and national insurance, property, and stamp taxes. Government spending has reached 23.7 percent of gross domestic product, and public debt amounts to 56 percent of domestic income.

Regulatory EfficiencyView Methodology

The overall regulatory environment is efficient and facilitates business formation, although no major reforms have been implemented in recent years. The labor market is relatively flexible, but enforcement of the labor codes remains ineffective. The government influences domestic prices for such “breadbasket” items as medicines, gasoline, and petroleum gas and subsidizes state-owned corporations.

Open MarketsView Methodology

The average tariff rate is 18.9 percent, and tariffs are a major source of government revenue. Some agricultural imports are restricted. New foreign investment is subject to a lengthy review process. The financial sector, the second most important contributor to the economy, is fairly competitive. However, nonperforming loans have increased to around 14 percent of total bank lending.

Country's Score Over Time

Bar Graph of The Bahamas Economic Freedom Scores Over a Time Period

Country Comparisons

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Regional Ranking

rank country overall change
1Chile78.5-0.2
2Colombia71.71.0
3Saint Lucia70.2-0.5
4The Bahamas68.7-1.1
5Uruguay 68.6-0.7
6Saint Vincent and the Grenadines681.0
7Barbados67.9-0.4
8Peru67.70.3
9Jamaica 67.71.0
10Costa Rica 67.20.3
11Dominica66.10.9
12El Salvador 65.7-0.5
13Trinidad and Tobago64.11.4
14Panama 64.10.7
15Paraguay 61.1-0.9
16Dominican Republic61-0.3
17Guatemala 60.4-0.8
18Nicaragua 57.6-0.8
19Honduras 57.40.3
20Belize56.80.1
21Brazil56.6-0.3
22Guyana55.5-0.2
23Suriname54.20.0
24Haiti51.32.4
25Ecuador49.21.2
26Bolivia46.8-1.6
27Argentina44.1-0.5
28Venezuela 34.3-2.0
29Cuba29.60.9
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