David Burt’s recent upbeat report on the Government’s finances suggests that the economy is on the upswing at long last.

Mr Burt, the Premier and Minister of Finance, said the Budget for the year ending March 31, 2023 had seen the estimated deficit fall to $44 million, a $26 million improvement on the original estimate of $70 million.

Part of the reason for the reduced deficit was $38 million in increased taxes as income rose from payroll tax, land tax, foreign currency purchase tax and immigration receipts.

Those figures indicate that through 2022 and into the first quarter of 2023 — the end of the financial year — the economy was recovering from the Covid-19 downturn and other economic problems.

Mr Burt also reported that payroll tax returns for the first quarter had increased by 1,800 employees — a roughly 5 per cent increase for a workforce estimated at 36,500 people, although it should be conceded that this could include some people working multiple jobs.

The Premier also said yet-to-be-released gross domestic product estimates for last year put the economy back at pre-pandemic levels, and the most recent quarterly GDP figures seem to support that, with revised figures recording year-over-year growth in three of the four quarters of 2022.

More broadly, international business has continued to perform well, with strong growth in Bermuda’s critical property-casualty re/insurance industry, with the reinsurance sector enjoying a long-overdue hard market with rising premiums, while the burgeoning long-term insurance sector continues to develop quickly, despite some regulatory concerns.

Tourism, too, continues its rebound from the Covid-19 pandemic, albeit not as quickly as some other countries.

The recently released Labour Force Survey supports the other data, reporting that unemployment had fallen to 3.1 per cent in November 2022 compared with 7.9 per cent in November 2020 and 3.8 per cent before the pandemic.

All of this is positive news, and Mr Burt and his government are understandably keen to trumpet it.

However, that does not mean Bermuda is out of the woods.

Retail sales are continuing to lag and have fallen in nine of the past 12 months. Certainly, this has been offset by surges in overseas purchases, suggesting residents are spending — just not in Bermuda. That has worrying implications for the retail sector, which remains an important employer and whose income fuels a significant portion of the economy.

Similarly, GDP is returning to pre-pandemic levels, but the reality is that Bermuda’s economy in 2019 was still smaller than it was in 2012 and earlier. For the economy to become truly buoyant, it still needs much more growth.

Indeed, this newspaper is not convinced by some of the statistics produced by the Government, not least the Labour Force Survey which estimated unemployment at 3.1 per cent. Until a census is carried out, it is impossible to know what Bermuda’s population size and the true employment picture is. The Labour Force Survey is just that — a survey.

The main concern for the Bermuda economy remains the cost of living. Even if Bermuda’s inflation rate really is lower than most other countries, it is starting from a high bar, as the island was already the most expensive country in the world before global inflation took off, and food costs continue to rise at a 10 per cent annual rate — a nightmare for many people in the economy.

While the recent growth in international business is welcome, it remains that the sector is a selective employer in Bermuda and is more likely to add jobs in its overseas offices than here. To ensure good jobs for more Bermudians, other sectors of the economy need to grow.

There are also, as ever, threats to international business, notably the global minimum tax. In the event Bermuda implements such a tax — and there has been shamefully little debate on what could be a watershed event for the island — it is very difficult to know what effect it may have, but it should not be assumed it will be positive.

In any event, as politicians on both sides of the aisle acknowledge, Bermuda needs to diversify its economy, and the obvious starting point is tourism and the Fairmont Southampton, without which Bermuda’s second industry is severely hampered.

With the renovation of the hotel still hanging on the question of what Walter Roban, the home affairs minister, will do with its special development order, the rest of the industry’s future is also uncertain. The Fairmont Southampton is critical for airlift and for hosting large conferences. This week’s submission of a revised plan may see this project get under way, although it is premature to judge the detail of the revised plan.

Other sections of the economy also need to contribute. Mr Burt’s pet project of fintech is starting to show some traction, but remains vulnerable to shocks such as the collapse of FTX. It is also unlikely to be a major employer — of the companies that have set up in Bermuda, many remain two or three-person offices on the island itself. It should not be dismissed for that reason, but there is a need for realism.

Many people will argue that relaxing immigration controls is the only solution to restoring economic growth to the island. The Government has begun to slowly and quietly move in this direction, in a way that would probably have been impossible under the One Bermuda Alliance government. Indeed, the irony is not lost that Jason Hayward, the Minister of Economy and Labour, is the person leading the reforms is the same person who opposed Pathways to Status.

While adding incentives to would-be job creators is welcome, the broader issue — that people will not want to come to Bermuda unless they see a growing economy — remains true.

Bermuda will also broaden its appeal if it can control costs better, and while this is a trickier proposition, it is a crucial one. As an importer of almost 100 per cent of its goods, Bermuda has less control over inflation than many other countries. Instead, it must try to control other cost drivers.

The Government has done a good job on this in reducing customs duty on essential foodstuffs in return for grocers holding down prices on these goods, but a broader look at import tariffs is needed, not least because of the regressive nature of the tax.

The island’s housing shortage, especially for rental properties, is a concern. Leaving aside the impact of properties being used for holiday rentals, this is at its heart a problem of supply and demand. Bermuda needs to build more homes, especially if it wishes to increase the population.

Here, too, the Government’s efforts to encourage development in Hamilton is welcome, but slow-moving. Counterintuitively, part of the problem is the Government’s extension of rent control some years ago. There is little interest from developers in building affordable rental housing if there are restrictions on how much can be charged for them. Relaxing rent controls will lead to an increase in supply.

The other problem here remains in the availability of credit. Bermuda’s banks have followed the example of other countries in raising interest rates, which is a tool for controlling inflation. But if much of Bermuda’s inflation is in fact driven from abroad, raising interest rates here will have little impact, but rather strangle growth that is badly needed.

To be sure, Bermuda not possessing a central bank that can fix a base rate makes this more complex, but reflexively raising rates cannot be the only approach. Certainly, bank profits are not being hurt — they rose 40 per cent in the fourth quarter of 2022 to $136 million. It’s no bad thing to have profitable banks, but it begs the question of whether this level of profitability is helpful to the Bermuda economy.

Bermuda’s economy is slowly recovering from the shock of the Covid-19 pandemic, but there is much more to be done.