Grim warning about job cuts

Bermuda’s crisis-hit economy is at a crossroads — and the clock is ticking on whether Government can show a turnaround by next year.

Finance Minister Bob Richards points to a slowing in the years-long decline and modest improvements in some areas as a pointer to better times ahead. And predictions based on the latest figures on the economy suggest that GDP (the measure of the country’s economic output) will remain flat or fall by 0.75 per cent this year, showing that the island has turned the corner.

Statistician Cordell Riley, however, predicts the island will remain in the economic doldrums through 2014 — and possibly into 2015. He added his worst case scenario would see 2,400 jobs disappear this year and that more creative measures, like the “letter of comfort” from Government to help developers turn Morgan’s Point into a new tourist Mecca might be needed .

Mr Richards was backed by Chamber of Commerce economics committee chief Peter Everson, who said he hoped to some green shoots of recovery by next spring.

But he warned that it would take time to engineer a recovery from recession — and that crucial elements like new developments, the implementation of the SAGE Commission report on cutting the cost of governing the island as well as next year’s Budget would all play a part in dictating how quickly the island bounces back. 

'Slump could drag into 2015’

The recession could continue into 2015 and as many as 2,400 jobs could go this year, an analyst and statistician warned yesterday.

Cordell Riley, of Profiles of Bermuda, was speaking as he released a grim projection that even more jobs could go this year alone if current economic trends continue.

Mr Riley said: “The likelihood is recession will continue into 2014 and probably into 2015.”

He added that Finance Minister Bob Richards, who released a series of economic indicators at the weekend,  said that the recession was unlikely to end this year, although a slowing of the long-term economic decline signalled the start of recovery next year.

Mr Richards pointed to a small increase of 0.5 per cent in employment income as a sign the decline had slowed.

But Mr Riley said: “The first quarter is traditionally slow anyway – it’s really the second and third quarters which are going to tell what’s happening.”

Mr Riley’s projection on current trends would see nearly 600 jobs – more than a quarter of the sector – go this year, while international business could shed up to 500 jobs (12.1 per cent) with a further 400 jobs disappearing in the business services sector. He said: “I certainly for one hope my forecast is way off, but I did it last year for a group of local and international business people and I was off by 100 jobs – less than one per cent.”

And he said: “The key sectors to watch are the construction industry to see if the declines are as steep as I am forecasting and the international companies – there have been some job losses there.”

Mr Riley said a “letter of comfort” to the developers of a new resort at Morgan’s Point, which is a financial guarantee to help them raise funding after the site was found to be contaminated by pollutants from its former life as a military base, may have been prompted by fears for construction.

He added: “I’m pretty certain that Government is aware of that because they already signed a letter of comfort for Morgan’s Point. That will get started this year, but the effects won’t be seen until next year.”

New deals

And he said similar guarantees may have to be given in the future to ensure developments go ahead and Bermudian jobs are protected.

He added: “Unless there are some new agreements, Morgan’s Point goes ahead and a lot of other things go ahead, we will see more of what’s happening now.

“If we want to stimulate the economy, something along the Morgan’s Point lines needs to be done so, in my view, that was a good thing for the economy.

“If we can do something along these lines, we will see a change in the jobs picture.”

Mr Riley added that it was estimated legalising casinos in Bermuda could create as many as 3,000 jobs – but that was dependent on whether there was a referendum soon on the issue and assuming a yes vote. He said: “If you look at the trends, a trend is very tough to change overnight – but it’s not impossible.”

Mr Riley’s forecast said that 2,000 jobs went in 2012, shrinking the workforce by more than five per cent.

The economy shed nearly 5,000 jobs since the peak of just over 40,000 jobs in 2008 to last year.