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Caribbean Islands Economy
In the mid-1980s, the Bahamas was classified as an upper
middle-income developing country and ranked among the wealthiest
nations in the Caribbean region. Tourism was the nation's primary
economic activity. In 1986 the World Bank reported that tourism
directly and indirectly accounted for approximately 50 percent of
employment. Tourism's share of the gross domestic product (GDP--see Glossary) was estimated at 70 percent by the United States
Department of Commerce.
In order to lessen the economy's dependency on tourism, the
government has followed a policy of diversification since the
1970s, emphasizing development in the industrial and agricultural
sectors. Success, however, has been limited. The nation experienced
setbacks in the early 1980s with the closing of steel and cement
plants and oil refineries. Because industries locating in the
Bahamas tended to be capital intensive, the industrial sector's
share of the labor force was estimated at just 6 percent in 1979.
Industry's share of GDP was estimated at about 10 percent in the
mid-1980s. The agricultural sector (including fishing) also
employed only about 6 percent of the labor force in the early
1980s. Despite various programs to boost production, the World Bank
estimated that agriculture in the Bahamas accounted for less than
5 percent of GDP in 1986. The nation's banking and finance sector
experienced significant growth in the 1970s and 1980s. This sector
contributed approximately 7 percent to GDP in the mid-1980s but
employed only about 3,000 Bahamians.
The overall performance of the economy during the past several
decades has been positive. In the 1960s, the country recorded
robust economic growth; growth rates averaged 9 percent annually as
direct foreign investment spurred the development of tourism.
Economic performance in the 1970s was not as successful. The
international economic recession caused a reduction in investment,
especially after the 1973 and 1979 oil price shocks. Bahamian
independence in 1973 also caused a certain amount of uncertainty,
contributing further to reduced foreign investment. Toward the end
of the decade, however, economic performance improved, led by
growth in tourism; investment soon followed suit, resulting in a
boom in the construction sector and an increase in employment
levels.
The economy continued to perform well in the early and mid1980s . Real GDP growth in the 1980-84 period averaged 3 percent.
The only notable setback occurred in 1981, when recession in the
United States resulted in a decline in stopover visitors (hotel
occupants rather than cruise ship or day visitors) and the
manufacturing sector was hurt by the closing of several plants;
real GDP for that year fell by 9 percent. Tourism recovered
quickly, however. In 1982 about 1.7 million foreign tourists
visited the Bahamas, and by 1986 that figure had grown to 3
million. GDP was US$1.8 billion in 1985, and per capita GDP was
estimated at US$7,822.
The nation was not without economic problems. Growth and
development were not uniform throughout the country. Most
development occurred in New Providence and Grand Bahama, causing
significant migration from the Family Islands to these two urban
centers. This migration strained the infrastructure and social
sectors of New Providence and Grand Bahama. The government also was
faced with the heavy burden of spreading facilities and services
throughout the Family Islands. A second problem of the Bahamian
economy was its dependence on a single sector, tourism; that
sector's well-being was in turn affected by the economy in the
United States, the source of most tourists. To reduce this
dependency, the government actively pursued a policy of
diversification. Finally, the country was afflicted with the
problem of structural unemployment; in 1986 unemployment levels
were estimated in the 17- to 22-percent range. Industrial
development tended to be capital intensive because of a high wage
structure and a scarcity of technically skilled labor.
Data as of November 1987
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