pick up... but tourism affects job growth By Ahmed ElAmin The Bermuda twin sector economy is healthy but one of its legs is showing structural weakness, Finance Minister Eugene Cox reported to the House yesterday.

Overall Bermuda's economic growth is projected to have slowed down in 1998 compared to 1997 according to Government's Economic Review. Gross domestic product (GDP) is projected to have grown three percent in real terms for fiscal year ending March 31, 1999, a slow down from the 4.3 percent real increase recorded in fiscal 1997/98.

Tourism numbers fell during the year while international business activity picked up. The estimated gross domestic product in constant market prices is estimated to be $608 million which could translate to about $2.46 billion for fiscal 1998/99.

By comparison the US economy is estimated to have grown at an annual rate of 3.5% in real terms during 1998.

Since the 1992/93 recession Bermuda's economy has grown an average of 4.1 percent in real terms, exceeding growth in the world's major industrialised countries.

Government's review reveals a significant split in the economy, with rapid growth in the international business sector and foreign exchange earnings from tourism falling below expectations.

The divergence in the sectors has troubling social implications, a disparity which is shown in preliminary figures from the 1998 Employment Survey. The number of jobs held by Bermudians decreased by 149 at the same time that non-Bermudians registered a net increase of 257 positions.

Mr. Cox said the divergence highlights the need for further efforts to ensure Bermudians benefit from the growth in the economy and that was how he structured his budget, with a focus on education, training and revitalising tourism.

Preliminary figures from the 1998 Employment Survey indicate that the rate of job creation in Bermuda was slower than in recent years. The survey results show only a net increase of 108 jobs over the previous year, compared to an increase of 663 in 1997. The total number of employed in 1998 was estimated at 35,404 employed.

The percentage of jobs held by non-Bermudians rose 0.6 percentage points to 19.1 percent of jobs, or 6,771 employed. The figure excludes the 1,526 jobs held by non-Bermudian spouses of Bermudians.

International companies registered the largest increase in employment with a net gain of 209 positions to 2,876 employed. The booming construction sector, fuelled in part by the demand for high quality office space by international companies, created 90 more jobs in 1998 for a total of 2,133.

The Statistics Department estimates that in the first three quarters of 1998 there was an estimated $93.5 million total value of work put in place by the construction industry, a fall of about 7.4 percent after accounting for inflation.

The fall was attributed to a slow down in the pace of construction on public projects compared to the previous year. The slack was partially taken up in the private sector with several large commercial projects underway. During the first three quarters of the year $82.2 million worth of new projects were started, about a 3.5 percent increase in real terms, ensuring that construction activity will remain strong in the medium term.

The decline in the tourism showed up in the decline in employment in the hotel, restaurant and retail sectors. Hotel employment fell by 251 jobs to 3,895. Since 1993 the number of jobs in the hotel industry has fallen by 11.9 percent.

There were 181 jobs lost in restaurants, cafes and bars, a sector in which there was estimated to employ about 1,671 in 1998. The number of jobs in the ailing retail sector by 83 positions to 4,283 employed. That number has fluctuated from a high of 4378 in 1994 to a low of 4,182 in 1993.

The difference in the international and tourist sectors is further highlighted by the GDP constant market estimates. International company expenditure in the local economy is projected to be $220 million in constant market prices, or about $796 million at current prices, by March 31, 1999, an increase of 11.7 percent after accounting for inflation.

International company expenditure made up 54.6 percent of the external demand in the economy.

Meanwhile visitor expenditure is projected to fall 1.2 percent to $120 million in constant market terms, or about $496 million in current prices, making up 29.8 percent of the external demand. Exports of goods and services remained stable at $63 million, or $179 million in current terms.

Domestic demand is projected to rise 5.1 percent in real terms during fiscal 1998/99 led by a 8.5 percent surge in gross fixed capital formation. The increase repeats the trend established in the previous financial year when domestic expenditures increased by 2.2 percent in real terms led by a six percent increase in gross fixed capital formation.

Government's direct consumption of goods and services is projected to increase 8.5 percent in real terms for fiscal 1998/99. Government consumption remained relatively stable in the previous fiscal year, growing at the rate of inflation to $273.3 million at current market prices.

Personal consumption is projected to grow at an accelerated real rate of 4.3 percent in the current fiscal year, fuelled by expanding employment income.

Personal consumption grew by 1.9 percent in real terms in 1997/98 to $1,484.9 million at current market prices.

Gross domestic consumption at current market prices was estimated at $2,076.8 million in the year to March 31, 1998.

The current account of the balance of payments registered a record surplus of $174 million in 1997 and Government expects another substantial surplus in 1998. The current account had a surplus of $171 million at the end of third quarter 1998, a $9 million increase over the same period 1997.

The increase was boosted by the continuing rise in international business foreign exchange earnings. Investment income is becoming a significant contributor to the current account surplus, a result of the easing of foreign exchange controls.

HOUSE OF ASSEMBLY H