Warnings: Bob Richards, Shadow Finance Minister, gave his mid-year review of the economy yesterday and said tourism and construction are in a slump. *Photo by Kageaki Smith
Warnings: Bob Richards, Shadow Finance Minister, gave his mid-year review of the economy yesterday and said tourism and construction are in a slump. *Photo by Kageaki Smith

Bermuda’s tourism sector will continue to struggle as America is still battling to recover from the recession, according to Shadow Finance Minister Bob Richards.

He said the fragile U.S. economy means people have less disposable income so are saving money by taking “staycations” — vacations at home — instead of travelling overseas.

Review

During his mid-year review of the economy yesterday, Mr. Richards gave a detailed review of U.S. spending habits, housing prices and consumer habits and predicted there will be no upturn for between six months to a year.

He said: “The main concern in the U.S. is over the possibility of a double-dip recession but most indicators I’ve seen show this is not likely to happen.

“We’ll be bouncing off the bottom here for quite some time in the near future — for the next six months to a year. Eighty per cent of the U.S. economy is driven by consumer spending.

“People are saving more and when savings are up, spending is less, which happened during the recession. Unemployment rates are up and when people are not working, they won’t spend money and therefore won’t drive the economy.

“Housing prices have also taken a big hit in the U.S. and on average housing prices are still declining.”

Mr. Richards — in his first review since the Budget debate in March — also warned that the island’s construction industry is experiencing a major recession. He said that while there are projects in the pipeline — including Government housing and the hospital upgrades — there are few others forthcoming.

Mr. Richards said: “There is high and rising unemployment in this sector and extreme swings in work permit policies, which has heightened uncertainty, thus discouraging business activity.

“It is natural in the business world to have peaks and troughs. Government’s job is to smooth the peaks and troughs.

“During its tenure this Government has only made troughs worse and we are in a very deep trough now.”

Problems

Mr. Richards said the attitude should be “steady as she goes” when it comes to the international business sector.

He added: “The problems which stemmed from the 2008/2009 meltdown seems to be behind us now and we are in a much more normalised situation, in the insurance sector particularly.”

But he believes a “cloud hangs over” the international business sector.

Mr. Richards said: “Switzerland has recently ended bank secrecy, due to the U.S. essentially making this so, and we don’t want a similar thing to happen here with regards to taxes and [offshore companies].

“The U.S. government is desperate for revenue and the uncertainty over this issue is the cloud that hangs over the international business sector.”

Mr. Richards ended his review by comparing Bermuda’s economic situation to a turbulent flight.

He said: “In the 1990s we convinced ourselves that Bermuda was like a 747 airline on autopilot — it didn’t matter who was up there on the flight deck as pilot and co-pilot.

“Instead, we focused on who was sitting in first class, economy and so on.

“Then, the moment we hit turbulence, it suddenly does matter who’s up there on the flight deck.

“In recent years our plane has lost a lot of altitude and a lot of speed, and if that plane crashes everybody goes down with it – regardless of where they are sitting.”