‘We didn’t overheat economy’ - Burt

The Shadow Minister of Finance has hit back at claims the PLP ‘aided and abetted’ the overheating of the economy.

Finance Minister Bob Richards told the House of Assembly on Friday that a 2003 memorandum of understanding between the former PLP Government and HSBC — which bought the Bank of Bermuda that year — was a contributing factor in the recession.

He said the PLP (Finance Minister Eugene Cox) encouraged the bank to increase credit and mortgage loans, and that the island’s GDP increased by 12 per cent in 2004 as a result. The next year — 2005 — the GDP rose by nine per cent.

“There was an aiding and abetting of this overheating,” said Mr Richards. 

“(The PLP) not only allowed, but aided and abetted the overheating of the economy in 2003/4.”

But yesterday Shadow Finance Minister David Burt said Mr Richards’ claims were “ludicrous”.

“[His] facts are wrong,” Mr Burt said. “Mr Richards mentions this 12 per cent figure, but this was not until 2006, and in 2005, international business increased by 24 per cent. 

“So to say this big boom was brought on by this memo and the memo proves the PLP was overheating the economy, is a fallacy.

Impressive growth

“I don’t believe any economist would agree with these claims. There is no cause and effect. The Government had an agreement in 2003 with HSBC and it wasn’t until 2006 the economy increased at a breakneck speed.

“The economy did experience impressive growth from 2003-6. Between 2001 and 2007, the contributions international business made to our GDP tripled, from $566 million to $1.59 billion.

“The financial intermediation sector also doubled in size, from 2001 to 2008, but public administration didn’t double or triple. And construction actually decreased in 2006 by five per cent.

“Also, the sale of the Bank of Bermuda put an extra billion into the local economy because the shareholders were bought out. So to say this memorandum signed 10 years ago was the reason the economy overheated, is ludicrous.

“The main contributor to the increase in growth in GDP was not Government spending, it was the tripling of the size of international business from 2001-7.”