Bermuda's current account surplus more than halved over the fourth quarter, dropping to its lowest level in at least three years, as a fall in travel revenue and a rise in job losses in the international business sector took effect, according to the latest statistics released by Government.

The Department of Statistics' Balance of Payments report for the fourth quarter of 2008 revealed that the Island's current account declined by more than $110 million to $80 million for last year's fourth quarter compared to $191 million for the same period in 2007.

The goods account recorded a deficit of $276 million in the last quarter of 2008, but service transactions realised a surplus of $122 million during the same time, representing a $25 million increase year-over-year. Meanwhile, the surplus on Bermuda's income account fell to $233 million in the final quarter of last year.

The report warned that there was no guarantee the trend of the current account surplus being eroded would be reversed in 2009, with a deficit becoming a high possibility in the future.

It said that for every quarter over the past decade, the Island's balance of payments had achieved a current account surplus, while the surplus averaged $222 million quarterly for the past five years alone.

"Given such a stellar record of surpluses, a current account deficit may then seem like an obscure thought," the report read.

"However, recent economic developments have eroded the foundation of our top two foreign exchange earners - travel and employee compensation.

"Historically, these two categories have accounted for as much as twice the current account surplus.

"Now, at the end of 2008, revenue from travel has declined an average of 21 percent or $28 million per quarter. Likewise, recent job losses in the international business sector imply that residents will be earning less in employee compensation."

A surplus for Bermuda means more is produced than is spent, with the economy saving more than it invests.

However, because the Island has high demand for its services, it is able to charge a higher price for them, reflected in a more expensive tourism product and a higher wage incurred for labour services offered to international businesses compared to other countries. While it may lead to increased savings, ultimately, it might mean a lower demand in the future as the country prices itself out of being competitive, the report surmised.

Conversely, it argued that a current account deficit may not necessarily be harmful, inviting foreign investment, but by bringing an end such a long streak of surpluses could in fact serve to erode investor confidence in the economy and discourage the very inflow of foreign funds needed to spur growth, adding that Bermuda should aim to maintain its status as a net lender to the rest of the world.