It is too early to say how Bermuda's economy will be impacted in the long term by Hurricane Fabian, but the Island will not buckle under the strain of paying for the damage, according to Finance Minister Eugene Cox.

And the overall effect on the economy will depend on how quickly repairs to the Island's damaged hotels, houses and businesses can be completed.

Yesterday Mr. Cox said that several key economic indicators would be affected - the balance of payments, a short term rise in unemployment in the hospitality sector as well as 1,200 beds lost and restaurants closed.

But he said that Government would not have to borrow more to pay for the clean-up, and many workers could be taken on to work on the restoration and construction process.

He added that the local insurance companies were in good shape to cope with the claims flooding into their doors.

"I am sure that many people are pondering that question (the cost and economic impact of Hurricane Fabian)," said Mr. Cox. "However, it is far too early to try to be too precise about the overall cost of Hurricane Fabian and its likely economic consequences."

Mr. Cox said that from an industry point of view, the Island had temporarily lost some capacity in the hotel sector - about 1,200 beds and that the restaurant sector has lost significant capacity as well.

"Owners and managers are still in the process of assessing the damage and considering the length of the recovery and restoration period," said Mr. Cox. "Inevitably, there will be some short term losses due to business interruption.

"I know that there have been some cancellations such as the MAR/Hedge Fund Conference that was slated for the week of 8th September and the cruise ship calls for that same week.

"The good news is that visitors still wish to come to Bermuda."

And he said that the longer term outcome would depend on how soon major repairs could be completed.

"I am told of Herculean efforts that have already been expended to restore some properties and these properties are receiving guests post-Fabian (Elbow Beach, Cambridge Beaches, Pompano)," he added.

Mr. Cox said that one potential mitigating factor was that the storm hit the Island near the end of the summer season.

He added that some of the properties that were more severely affected may take the additional time to fully restore their facilities to the previous or even higher standards and gave as an example Sonesta Beach Hotel which has announced that it is not likely to re-open until May 2004.

"As a result of the forced closures due to the storm damage, there will be a rise in short term unemployment in the hospitality sector," he said. "Some seasonal contract workers have elected to return to their home countries at an earlier date.

"I understand that hoteliers are working with the Bermuda Industrial Union to mitigate the financial hardship on workers by retaining as many workers as possible to assist in the recovery and restoration process."

Mr. Cox said that some areas of the retail sector, primarily hardware and building supply outlets, have experienced a boost in sales as a result of Fabian.

He added: "So far this year, the retail sector has generally held its own and has experienced better turnover than last year. Gross turnover has been up by about two per cent in real terms. However, if there is a fall-off in visitor arrivals as a result of Fabian, outlets specialising in tourist-related products may have a soft fourth quarter."

Mr. Cox said that the sector that should remain buoyant as a result of Hurricane Fabian was the construction sector.

"The construction sector was already at near full capacity before the hurricane and now there is more work," he said. "The clean-up and reconstruction period should provide many employment opportunities for skilled tradesmen and labourers. Such activity will have a positive effect on the wider economy."

He would not be drawn on the possible cost of the storm damage, stating that it was "premature to guess at this stage".

Mr. Cox said: "I am aware that WIR Worldwide Corp. has ventured forth a figure in the range of $300 to $350 million as the estimated cost of Fabian to Bermudian businesses and households.

"However, our major local insurers consider that estimate to be on the high side. The claims submitted so far amount to $70-$80 million. I think that in a week or so, insurers will have a sounder basis upon which to estimate what the eventual total cost of Fabian may be."

He added that the insurance sector was buoyant and should not be negatively affected by Fabian.

"Senior executives of the local insurance companies have indicated that their balance sheets are strong on capital and reserves, and that the claims arising from Fabian should not put them in any difficulty. This is good news," he said.

But he said that Bermuda's balance of payments in the fourth quarter "may come under some pressure as a result of Fabian".

"I think it is reasonable to anticipate higher than expected imports of building material and supplies, higher than usual imports of furniture and equipment, and some likelihood of fewer visitors and therefore lower visitor expenditure," said Mr. Cox.

"These pressures could be offset somewhat by reduced overseas travel by Bermudians during the fourth quarter which would have the effect of conserving foreign exchange funds. Some may say this is wishful thinking!"

But he said that he did not know how good the second and third quarters had been as data was not yet available.

"So it is difficult to say, at this juncture, what the balance of payments for 2003 will look like," he said.

He said that the most recent Consumer Price Index, which is used as a measure of inflation, stood at 3.1 percent in July 2003.

"Government anticipates that the rate of inflation should remain stable around the 3 percent mark. Price stability for essential goods and services in the wake of disruptive events is always welcomed," he added.

He said that turning to the government sector, government revenues had been on track so far this year and overall expenditures had been within budget.

"We expect to hit the revenue target of $650 million. Meanwhile, the $625 million current expenditure budget has been closely controlled. Therefore, government finances are in a good position," he said.

"However, there will be some unplanned expenditures related to Hurricane Fabian. Emergency services have been delivered and emergency restoration of public sector buildings (school buildings in particular), roads and other infrastructure is underway."

And he said the cost of Fabian to the public sector was being documented and reports on total costs will be produced in due course.

"Because government finances are in a relatively good position, government will not have to borrow more than was planned for in the budget, even after the unplanned costs of Fabian," he said. "In fact, there is a very strong likelihood that government may borrow less than the $78 million that was projected at the time of the budget in February 2003. I think that is excellent news."

He also said Government was also encouraged that immediately in the wake of Hurricane Fabian, Standard & Poor's confirmed Bermuda's long term credit rating at 'AA'.

"I think that is more good news and will end on that note," he said, adding that he will have more to say about the economy later in the fall.

"Government is approaching the mid-point of its financial year at the end of September. As Minister of Finance, I will present a mid-year assessment of economic conditions in Bermuda and provide an outlook for the remainder of the year," he said.