Billions of dollars of Bermudians’ savings have left the island over the past decade and that is at the heart of the island’s economic problems.

That is the view of economist Robert Stubbs, who believes that household savings and the profits of local businesses amounted to $21.2 billion over a ten-year period from 2008 to 2017.

That figure does not include the profits of the international business sector.

In an opinion piece featured today, Mr Stubbs says the island’s savings rate is more than one third of income.

The $21.2 billion saved — the lion’s share of which was household savings — equates to “roughly $1 billion for every square mile of the island, or enough to cover our national debt before you get to Flatts if driving due west from the airport”, he wrote.

He added: “Expressed as a ratio of total income, or GDP, Bermuda’s private-sector savings is approximately 36 per cent, which is more than sufficient to qualify us as one of the highest saving countries of the world.”

Asked how the savings rate could be so high when so many people struggled through an economically challenging decade for Bermuda, Mr Stubbs said some of it was down to mandatory pension fund payments.

“Many people might be living paycheque to paycheque, but if they are working they are still contributing to their pensions at a rate of 10 per cent of salary [a 5 per cent deduction from their gross pay matched by their employer],” Mr Stubbs said.

“The problem is that it takes a large chunk from people’s incomes and it’s all going overseas to fund other countries. That’s a large part of our economic problem.”

The other driver of the high savings rate was that “people at the higher end of income distribution are saving enormous amounts”, he said, but much of this was being invested outside Bermuda.

Mr Stubbs believes that a portion of pension money being invested locally — in infrastructure or the local capital market, for example — would strengthen the economy and reduce reliance on overseas creditors.

He will flesh out those ideas and propose policy ideas in a series of weekly commentary pieces in The Royal Gazette, following on from today’s.

Mr Stubbs said he had made presentations to government officials including Curtis Dickinson, the Minister of Finance, and members of the opposition One Bermuda Alliance, and had received favourable responses. He has also shared his research with The Fiscal Responsibility Panel, which advocated some domestic investment of pension funds in its 2018 report.

The Ministry of Finance’s Pre-Budget report states that $3 billion earned in Bermuda has been reinvested in foreign economies over the last ten years, citing Bermuda Monetary Authority figures.

Mr Stubbs believes a larger amount is leaving the country, about $1 billion per year. He referred to the national accounts aggregates quoted in GDP reports.

In 2017, for example, gross national savings were estimated at $2.1 billion. The report added: “Of the total savings, $858.6 million was spent on gross capital formation (investment in capital goods), which positioned the island as a net lender to the rest of the world in the amount of $1.3 billion.”