US Consul General Gregory Slayton became the first person to use the dreaded "R" word when he said this week that he believed both the US and Bermuda are already in recession.

The technical definition for a recession is two consecutive quarters of declines in gross national product – which is the total output of goods and services by a country.

The problem is that you can't be certain that you are in a recession until at least six months after it starts – and in mild recessions, you may already be coming out of it.

In that context, it does not take much to realise you are in an economic downturn or recession well before it's official.

On the face of it, Bermuda is probably not there yet, but there's every reason to think that it is coming and that it won't be mild.

Government has already scaled back its growth estimates for gross domestic product (GNP minus foreign investment income) to two from 2.5 percent, and that was before the current market turmoil.

With inflation running at five percent, it would be easy for people to already feel like they are less well off than they were a year ago, to modify Ronald Reagan's famous election question.

And few would dispute that the soaring costs of everything from groceries to fuel and power (at least for now) means that it is getting harder to make ends meet.

The question then, is what can be done about it?

Mr. Slayton noted that 80 percent of the economy is dependent on international business, and that sector is inextricably intertwined with the world financial system, so it is facing unprecedented challenges.

He said Government and business need to come together in a meaningful way to find ways to enable Bermuda to keep its competitive advantage.

This is inarguable, and to some extent, it happens already, but there is growing evidence that international businesses are feeling less welcome than they did in the past. One of Mr. Slayton's own recommendations is to allow more "job makers" to come to the Island, and again, there is some anecdotal evidence that Bermuda, at a time when it should be welcoming entrepreneurs, is being less than warm.

The reality is that Bermuda should be doing absolutely everything it can to ensure that international companies want to come to Bermuda and that they want to stay here.

The Island has already seen job cuts and as the reality of the financial crisis sinks in, there will be more. And long before the current crisis, it was clear that the international sector was making jobs elsewhere, and not in Bermuda.

In the recent past, it has been noted that this is not altogether a bad thing for an Island which may well be at its maximum carrying capacity. Some flattening, or even small declines in house sale and rental prices would be welcome, especially for young Bermudians who despair of ever owning their piece of the rock.

But huge care needs to be taken that an economic slowdown does not become an economic slump. Heavy job reductions, even at the expense of non-Bermudians, takes huge amounts of income out of the economy, while landlords and home owners could face the nightmare of negative equity.

Mr. Slayton is right to say that Bermuda needs to look at new sources of income and doing business. To be blunt, tourism is simply not going to fill the gap in a recession when vacations and foreign travel are always among the first "luxuries" to go.

But before looking at other possibilities, Bermuda needs to make absolutely certain that it keeps what it does have – the reputation and reality of being one of the world's leading financial centres.

We cannot afford to give up this golden egg.