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- GDP (PPP):
- $11.4 billion
- 1.9% growth
- 0.4% 5-year compound annual growth
- $32,036 per capita
- Inflation (CPI):
- FDI Inflow:
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.
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.
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.
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.
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.
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.