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How long will the recession last? This question continues to engage economists, government planners and the media around the world.

In its 2009 budget, the Bermuda Government indicated the recession would last 18 months, with recovery expected by the end of this year.

I never thought this was a smart bet - and certainly not one I would gear government financial planning around.

Economic forecasting is not a precise science as it involves interpreting constantly changing indicators. But with careful observation one stands a good chance of anticipating conditions.

U.S. consumer confidence has been crushed by the recession, figures released this month show. As long as this trend continues, we should not expect significant improvement in our tourism industry. And when confidence does begin to return, we can expect a lag before any recovery.

Other figures released last week show the amount of risk aversion in financial markets - otherwise known as the credit crunch.

It rocketed last autumn and there has been little improvement.

Frozen credit markets directly affect the mutual and hedge fund industry here in Bermuda.

While risk aversion is elevated, there will be no let up in the weakness of these sectors

because they live on credit.

Insurance - while not directly impacted by these adverse conditions - has seen profits suffer due to asset value write-down.

Also, the rationing of credit means less money is available to capitalize new insurance firms.

The uncertainty created by the OECD tax havens lists has interrupted plans for investors in countries like Bermuda. Despite the recession originating in the U.S., indicators are worse in the UK and almost as bad in most major EU economies.

The latter group labours under a more restrictive monetary policy than the States and greater

structural inflexibility, so recovery will likely lag the U.S. The UK has resorted to printing money but her financial institutions are severely damaged and recovery will be slow. All these external factors influence our economy. Internally, we are mismanaging the promotion of tourism in the U.S. compared to our Caribbean counterparts.

The impact of being on the OECD grey list is not yet clear.

But the Isle of Man and Cayman are acting on this critical issue in comparison to our Finance

Minister's lumbering response.

The job market here will stay weak, especially in construction and financial services related to the hedge fund industry.

Employment is a lagging indicator, meaning its recovery will trail the rest of the economy.

The international economy will not pull out of the recession until 2010 and Bermuda will lag behind.

In my Budget Reply in February, I outlined ways to improve our situation but two are priorities - we need the Finance Minister to get Bermuda off the OECD grey list and new leadership in the tourism industry.

We need someone with a plan that targets like a laser on driving up our core business in the U.S.[[In-content Ad]]

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