Our economy is in need of growth to create jobs and opportunities for Bermudians.We need to implement an action plan to stimulate growth to at least the peak level of the past five years. The graphs below show what our economy needs to start doing from 2013 onwards just to get us back to our past peak levels.If we just stand by and do nothing, we must be willing to live with the consequences of a lower standard of living and we will have to put twice the effort in to get the same result currently required - the longer the wait, the steeper the climb.GDP (billions of $)We have lost $480m from our peak to our presentNow- From $6.11bn in 2008, GDP has fallen 7.5% to an expected $5.65bn in 2011.- Expected to decline again in 2012. Government revenue is not rising.- Government’s ability to raise or increase taxes is very limited.Consequences- If GDP continues declining, then by 2017, GDP will likely be less than $5bn.- Personal as well as business incomes will have continued to fall.- Government’s ability to raise or increase taxes will continue to fall.- General quality of life in Bermuda will have fallen.Action Plan- GDP must stop declining, flatten out, and start rising.- GDP must go back up past the 2008 level of $6.11bn.- Personal and business incomes need to rise.- Government’s ability to raise income needs to increase.IB Foreign currency earnings (billions of $)We have lost $900m from our peak to our presentNow- International Business (IB) brings in at least $85 of every $100 of Foreign Currency dollar that comes into Bermuda.- Between 2008 and 2010, IB brought in nine percent less.- IB’s 2011 foreign currency contribution is believed to be down from 2010’s level.- Between 2009 and 2011, the number of IB companies operating from Bermuda fell five percent.Consequences- The number of IB companies and personnel operating from Bermuda continues to decline.- The FC earned by IB continues to decline.- Bermuda’s overall economy continues shrinking.- Bermuda’s residential population continues to drop.- Bermuda’s supply of foreign dollars begins to shrink and Bermuda’s ability to buy goods from overseas will decline significantly.Action Plan- The number of IB companies operating from Bermuda and employing people who are resident in Bermuda needs to increase and go back up past the levels seen in 2006 and before.- IB’s foreign currency contribution needs to rebound and go up at least 10 percent, back above 2008’s level.- Bermuda’s residential population needs to increase.National Debt (Millions of $)We have increased our debt by $924m in five yearsNow- In 2012/13, at $1.4bn, National Debt is 153% of Government revenue of $910m.- It takes $13 out of every $100 of Government revenue to pay interest on the debt.Consequences- If debt is not reduced, more and more tax money will have to be sent overseas to finance debt.- Less and less tax money will be available for salaries, goods, and services and the quality of life as well as the quality of Bermuda’s infrastructure will degrade.- Bermuda could slide towards ‘third world status’.Action Plan- If debt is reduced, then less tax money will have to be sent overseas to finance debt.- If Government revenue rises, there will be more money available to reduce debt, provide public services and repair and build new government projects.Debt Service Expense (Millions of $)We have increased our interest payment on the debt by $77m in five yearsNow- Out of every $100 that Government takes in, $13 must be priority allocated to Debt Interest payments and the 2.5% contributions to the Sinking Fund.- In 2012/13 this combined payment will be $115,800,000.Consequences- If National Debt goes on rising, $14, then $15 and so on ... out of every $100 of revenue will have to be priority allocated to debt service cost.- Debt service cost will quickly rise past $120m a year and keep on rising.- This quirk in Government spending will help slide Bermuda towards ‘third world status’.Action Plan- If the National Debt can be stabilized at $1.4bn, then debt service cost can stabilize at this year’s level; before starting to be reduced.Government Revenue and Spending (Millions of $)Revenue and Spending must reach the X pointNow- In 2008/09, just $3 out of every $100 revenue dollar had to be priority spent on debt service cost.- In 2012/13, $13 out of every $100 revenue must be priority spent on debt service cost.- In 2012/13 Government plans to spend about $119 for every $100 that it takes in.- In 2012/13, about $16 out of every $100 that Government plans to spend will have to be borrowed.- Government net spending in Bermuda on Bermudians is falling.Consequences- If Government spending always exceeds revenue, then debt service cost will always rise and Government’s net spending on salaries, goods, and services will always fall.- In less than a decade, Bermuda could drop to ‘third world status’.Action Plan- As soon as possible Government spending must be less than Government revenue.- Once this happens, debt service costs can stop rising.- Either Government revenue rises or Government spending falls or both move until spending crosses revenue reaching the X point.- After the X point, Government net spending in Bermuda on Bermudians can rise because debt service cost will start reducing.National WorkforceSeven percent drop must become an eight percent increaseNow- The total number of people in the national workforce is declining.- The total number of foreign workers is declining.- Bermuda’s residential population is falling.- Bermuda’s consumer base is shrinking.- All sectors of the economy are declining.Consequences- National workforce continues to decrease and drops below the 33,000 level, which is where it was 27 years ago in 1985.- Bermuda’s residential population continues falling.- Bermuda’s consumer base goes on shrinking and all sectors of the economy continue declining.- Bermuda standard of living decreases.Action Plan- Increase total number of working Bermudians and foreign workers increases.- The national workforce needs to get back to the 40,000+ level reached in 2008.- Bermuda’s residential population increases.- Bermuda’s consumer base grows and all sectors of the economy improve and grow.- The occupancy and utilization of services increases creating more employment opportunities for Bermudians.Private & Government Sector EmploymentPrivate Sector employment must go back above 33,000Now- About 21 percent (7,855) of the total national workforce (37,379) works directly or indirectly (Quangos) for Government.- The Private sector workforce is 29,524.- The number of unemployed Bermudians is not known. Reportedly between 1,000 to 4,000.Consequences- The private sector continues to shrink.- Government either stays at 7,855 or grows.- This will increase the Government’s demand since the shrinking economy will force Government to increase its revenue source by increasing taxes or increase its borrowing. Either way is a bad decision.Action Plan- The whole economy grows because the private sector grows.- The private sector achieves growth and adds workers - perhaps 3,000 - pushing the national workforce back to 40,379.- This can happen with 1,800 existing workers leaving Government to go back into the private sector and 3,000 new (foreign) workers being added for total private sector job growth of 4,800.- The private sector will employ 34,324 (up 16 percent) while Government employs 6,055 (down 23 percent).In 2012, all indications are that GDP, national workforce and residential populations will continue falling and that, as suggested in the February Budget Statement, Bermuda’s economy will “remain weak”.On-Island changes that will help or cause Bermuda’s economy to turn around and regenerate are not having any effect in 2012, and Bermuda’s economic slide continues. Bermuda’s downwards economic slide must be stopped and the cross over point (the “X” point) of reducing government sector cost and increasing private sector income must be an imperative.Get involved and send us your thoughts. This continues to be a collective effort by all Bermudians and we need your continued support, comments and ideas. For further information email Suzie Arruda at economy@challengerbanks.bm or visit us on Facebook: Regeneration of Bermuda’s Economy.