The Government is cautiously studying controversial tax and economic decisions by the new US administration to determine what, if any, impact they will have on Bermuda’s economic recovery.

This, as authorities delivered the news from the latest economic figures that the island’s economy actually contracted.

Jason Hayward, the Minister of Economy and Labour, said US president Donald Trump’s proposals to vary income tax levels, corporate taxation and tariffs are among items that could impact the island.

During a press conference on Bermuda’s economic performance in the third quarter of 2024, Mr Hayward said: “Trade wars from a global standpoint, do not benefit the world, and will be monitored to determine what will be the actual impact on Bermuda and our inflation rate.”

In surprise news, Mr Hayward reported that Bermuda’s “rapid economic expansion” has eased. After adjusting for inflation, the economy “tapered by an estimated 1.1 per cent year-over-year”.

He attributed this economic contraction directly to the increase in imports of goods and services and contractions in household and government expenditures.

In current prices, gross domestic product decreased 1.4 per cent year-over-year.

Addressing questions from The Royal Gazette, the minister said the cost of doing business in Bermuda, and the cost of living, are the biggest hurdles going forward.

“That has a negative impact on our overall economic performance,” he said.

He added that Bermuda’s rapidly ageing population presents another challenge that could result in workforce shortages in the future.

“We have a huge number of individuals who will be exiting our workforce through retirement, and those individuals will need to be replaced,” the minister said.

He said that moving forward, Bermuda needs to ensure it has the capital to support a growing economy.

Consumer spending in the third quarter declined 0.6 per cent year-over-year to $825.8 million. Consumption of services increased 0.6 per cent year-over-year, reflected in higher expenditures on services related to vehicle maintenance and repair.

Spending on non-durable goods fell 1.6 per cent, influenced primarily by decreased spending on clothing, footwear and alcoholic beverages.

Spending on durable goods contracted 2.5 per cent owing to reduced spending on new and used cars, furniture and furnishings, and major household appliances.

Employment income in the third quarter was 6.5 per cent above 2023 levels.

Transport and communications experienced the biggest jump in employment income with an increase of 15.3 per cent.

International business employment income increased 8.7 per cent, hotels and restaurants by 8.7 per cent, banking insurance and real estate by 6.7 per cent, business services by 10.6 per cent, public administration and defence by 3 per cent and construction grew by 4.5 per cent. Wholesale and retail saw the smallest increase in employment income, with a rise of 2.8 per cent.

“The third-quarter growth in employee remuneration in these sectors is positive, and the income levels continue to outpace pre-pandemic employment income levels,” Mr Hayward said.

There was good news on the tourism front, which saw air visitors increase from 61,432 during the third quarter of 2023, to 66,920 in the same period last year. Estimated expenditure by air visitors increased from $111.5 million in the third quarter of 2023 to $139.4 million in the same period last year.

Government final consumption declined by 1.6 per cent during the quarter, driven by lower expenditures on insurance, wages and professional services.

Gross capital formation grew 10.9 per cent to $208.2 million. Investment related to construction rose 5.1 per cent, while investment in machinery and equipment increased 17.3 per cent owing to higher agricultural and industrial machinery imports.

Bermuda’s trade balance fell 7.8 per cent to $352.5 million as payments for the import of goods and services outpaced the growth receipts for the exports of goods and services.

Exports of goods and services increased by 10 per cent during the quarter, partly because of increased revenues related to travel and other services.

In contrast to the third-quarter economic performance, the first-quarter GDP estimates were revised upwards from a 6.6 per cent increase to 6.8 per cent, and second-quarter estimates have been revised upwards from an 8.7 per cent increase to 9.5 per cent.