Good evening,
Initially, I wish to offer my condolences to the families of those who have lost loved ones to this pandemic. I would also like to thank all of our front line workers who are out there daily, working hard, battling this pandemic, providing vital services; protecting our health and well-being, and keeping our island functioning. We are grateful for your dedication and commitment and especially your bravery.
On March 16th, I advised the general public on the action being taken as part of the Ministry of Finance COVID-19 - Fiscal Plan. These actions were as follows:
- To obtain emergency financing to supplement reduced revenues and additional COVID-19 related expenditures.
- To provide additional funding to assist Bermuda’s unemployed as a result of the economic impact of COVID-19.
- To curtail lower priority expenditures to ensure that spending needed for COVID-19 matters can be maintained.
I also noted that no spending reductions would be made that would jeopardize the health, safety, and security of the people of Bermuda. Bermuda’s unemployed will be assisted, and fiscal prudence will be strictly maintained.
To support these initiatives, the debt ceiling was raised by $150 million to $2.9 billion during the final sitting of the House of Assembly and at this time net debt stands at $2.680 billion leaving the Government with approximately $220 million of borrowing capacity.
Additionally, the Ministry has executed a $20 million credit facility with a local financial institution and is in the process of finalizing another $150 million facility with other local financial institutions.
This borrowing capacity, together with current cash reserves will assist the Government in taking the appropriate actions to mitigate the impact of COVID-19 in the short-term. To assist people out of work due to the economic impact of COVID-19, the Government has quickly introduced an unemployment benefit.
The Ministry of Finance has worked closely with the Department of Workforce Development and our local banks to ensure that as soon as possible, money was available for unemployment benefits. We recognized that time was of the essence. I'm also pleased to announce additional manpower, other parts of government will be marshaled to speed up the process and get much needed to funds to our families that have found themselves displaced by COVID-19.
We have responded quickly to this crisis and have used the tools and resources at our disposal in a meaningful way to provide much needed financial assistance to our people during this unprecedented time.
As of this week, the government expects to have paid benefits to just over 5,000 persons at a total cost of approximately $8 million.
We recognize the importance of continuing to help our people through these challenging times, and the unemployment benefits, provide temporary assistance, by providing financial support to meet people's basic needs.
In the recently conducted 2019/2020 fiscal year, the Ministry of Finance has provided increased emergency funding of $2.8 million to the Ministry of Health to fund personal protective equipment, testing kits and testing equipment, among other things.
Additional funding has also been provided to the Ministry of National Security in the amount of $450,000, in order to embodying the regiment, and provide quarantine facilities.
A further $171,000 has been provided to the Ministry of Public Works, Ministry of Legal Affairs and Department of Information and Digital Technology for other COVID-19 matters. To assist businesses that have a pressing need for financial relief, on April 3, the Government announced that several temporary emergency measures were instituted, which included extending deadlines for tax filings and deferring or possibly waiving of fees, taxes, and penalties.
In many parts of the world, the COVID-19 pandemic has negatively impacted companies of all kinds, small and medium sized enterprises have not been spared. Many SME's business models depend on face to face contact and the physical location, in order to drive their business models. With the current crisis and the Shelter in Place Order, these businesses have suffered significantly and have experienced job losses.
Small and medium sized businesses are an essential part of the Bermuda economy. The Bermuda Economic Development Corporation (BEDC) is currently doing their part to support these businesses through COVID-19 and beyond. I can advise that the Government will provide support in the amount of $12 million to enable the BEDC to provide resources to expand the programs now being run to assist small and medium sized enterprises.
At my press conference on March 16th, I noted that the future was not clear, but I advised that the implications for Bermuda would likely include:
- Slower growth in Bermuda's economy;
- A rise in unemployment;
- A downturn in visitor arrivals;
- And reductions in consumer spending, retail sales, and government revenues.
A recent OECD interim economic outlook reported that the Coronavirus has put the world economy at risk, and that the Economic Impact of the Pandemic public-health measures to suppress COVID-19 will cause a severe economic shock in all directly affected economies. The economic consequences will be extreme in the short term and could be severe in the long term if governments get their economic policy responses incorrect.
Early signs imply that the economic hit will be considerably worse than the Global Financial Crisis. Predicting the exact scale of the economic damage at this point is difficult due to continuing uncertainties.
During the global financial crisis, the deepest contraction in the Bermuda economy was 5.6% in 2009. The 2009 recession was the most severe one to have affected Bermuda since the 1930s. In line with most other countries, we expect the contraction in the Bermuda economy in 2020 to be worse than in 2009, due to COVID-19. The Ministry is in the process of getting economic modeling done by independent parties.
In the 2019 Economic Review presented in the House of Assembly on Budget Day, the Ministry reported that the island’s economic growth in 2020 was estimated to expand by 1.0–2.0 per cent. COVID-19 impacts have made this projection no longer valid as it has disrupted most sectors of the Bermuda economy.
By way of example, the total number of persons to be paid unemployment benefits as of this week is just over 5000 persons. This represents approximately 15% of the 35,393 persons, working in Bermuda. The tourism sector has been left with major challenges due to travel bans and cruise ship cancellations. Business closures during the Shelter in Place Order mean that economic activity has slowed dramatically.
After considering the impact that COVID-19 could have on all sectors in the Bermuda economy and the level of unemployment the Ministry of Finance, working with the Caribbean Regional Technical Assistance Centre (CARTAC), has revised our growth forecast from 1.0% to 2.0% per cent to -7.5% to -12.5%. It is important to note that this is a preliminary projection, is based on reasonable assumptions and is primarily dependent on how long intensive suppression measures remain in force. The IMF, in their World Economic Outlook on April 14th, have predicted the global economy will contract by 3% in 2020, and in the US, 5.9%.
The economic impact of COVID-19 will also have severe knock-on effects on the 2020/21 Budget. The combination of lower fiscal revenues, and higher public spending, will no doubt cause the projected budget deficit of $19.8 million to increase.
The Ministry of Finance COVID-19 - Fiscal Plan calls for a reexamination and reduction of lower priority budget expenditures to ensure that spending needed for COVID-19 matters are maintained.
In line with the zero-based budgeting methodology reintroduced this fiscal year, the 2020/21 budget will require a revised alignment of the allocation of resources to tackle the threats posed by COVID-19.
To that end, over the next three months Government will:
- Delay the start of any capital projects that have not commenced; this could save between $10 - $15 million;
- Institute an immediate freeze on the funding of vacant post that are not required to address COVID-19 or to protect Bermuda’s national interests; this could save between $10-$15 million;
- Continue the ban on non-essential government travel which could save between $1-$2 million; and
- Reducing all discretionary spending including training, materials and supplies, clothing and uniforms etc. which could save $3-$5 million.
We understand that the economy must be addressed, however we must make it clear that the Government’s number one priority is managing this health crisis.
The Ministry of Finance recognizes that to navigate appropriately through this crisis we will require the input and advice from all stakeholders in the community.
Accordingly, as I mentioned in my March press conference, the Ministry of Finance has increased its monitoring of global economic conditions and its interaction with stakeholders in the public and private sector to obtain views from business leaders about industry sector performance and their outlook. This will assist in the development of our economic recovery plans for COVID-19.
Additionally, the Ministry of Finance has already engaged with the Fiscal Responsibility Panel to seek their feedback. Further, on April 10th the Ministry of Finance and BMA convened an emergency meeting with the Financial Policy Council on COVID-19. The purpose of this Special Meeting of the Financial Policy Council was to provide a forum for preliminary discussion and advice to me, as the Minister of Finance and the Bermuda Monetary Authority on the possible impact of COVID-19 developments on the financial stability of Bermuda.
The scale and speed of the economic recovery in Bermuda will depend critically on the economic policy actions taken now.
To build on the momentum from the FPC meeting, I can confirm that I will be establishing a COVID-19 Economic Advisory Committee. The committee will include key stakeholders in the Bermuda economy and community. They will provide advice to me and will help to get our economy moving again.
As I said previously, the Ministry of Finance recognizes that to get through this crisis appropriately we need the input and advice from all, including the general public. To this end the Ministry will be setting up an email address as well as the Online Government Forum where you can submit your ideas, your suggestions and your vision for the revitalization of our economy in the post COVID-19 world. The email address and the launch of the Online Government Forum section will be announced shortly.
Finally, the Ministry is also working with The Caribbean Regional Technical Assistance Centre (CARTAC) and the International Monetary Fund (IMF) to observe what other measures are being implemented by countries in the region to mitigate the impact of COVID-19.
Our economy will change, and the Government will change to take the challenge head on to create outcomes that benefit the people of Bermuda. Yet, as the Government will have to change, businesses will also have to change, and our people will have to be ready to change and embrace change as well. The old models may no longer work, the old thinking may no longer be relevant and the old way of doing business may not be what Bermuda needs to survive and thrive in the new reality of our global economy.
In closing I will once again thank all of our essential workers and everyone who is on the front line, working day and night to ensure our health and well-being. We are grateful for the sacrifice and dedication of all of those wonderful people keeping us safe, keeping this island operating, while putting their own safety at risk. Thanks also to those businesses and individuals who are generously donating funds, resources, and supplies to assist in our efforts to fight this virus.
Thank you.