Stable Democratic Government:
The Bahamas offers potential investors a peaceful and stable democratic environment with a strong commitment to the rule of law.
The country offers relief from taxes on personal income, inheritance, capital gains, corporate income, and other taxes related to dividends and interest.
Tourism and financial services are the main economic drivers:
With a limited industrial sector, the Bahamian economy is heavily dependent on tourism and related services and financial services. These sectors have traditionally attracted most of the Foreign Direct Investment (FDI), and investment is encouraged by the government. Tourism and related services contribute approximately 70 percent of the country’s Gross Domestic Product (GDP) and employs just over half of the workforce. However, Hurricane Dorian (2019) and the COVID-19 pandemic devastated the economy and forced tens of thousands out of jobs. A survey of the labor force has not been completed since December 2019, yet government and international agencies estimate unemployment at 20 to 25 percent. Although tourism is on the rebound, it has yet to reach the pre-pandemic level of more than seven million annual tourists, most coming from the United States. Financial services, including a growing cryptocurrency sector, is the second most important driver of the economy, accounting for 15 percent of GDP. To diversify the economy, the government has targeted investment in light manufacturing, technology, agriculture, fisheries, extractive industries, and renewable energy. The government has also committed to digitizing business services and jumpstarting domestic productivity through small and medium enterprises (SMEs), especially those operating in non-traditional sectors. Grand Bahama, the most northern Bahamian island, depends less on tourism and has the most diversified economy of any island in the country. Its capital, Freeport, is a free trade zone featuring many U.S.-owned businesses.
The World Bank recognizes The Bahamas as a high-income, developed country with a GDP per capita of $25,194 (2020) and a Gross National Income per capita of $26,070 (2020). However, the designation belies the country’s extreme income inequality, as statistics are driven by a small percentage of high-net-worth individuals, while most Bahamians earn far less. Following two years of pandemic-related government borrowing, spending, and tax concessions, the country has seen recent economic growth credited to rebounding tourism and the lifting of COVID restrictions. According to the International Monetary Fund’s 2022 Country Report, The Bahamas is experiencing a tourism-led rebound, and real GDP growth in 2021 was close to 14 percent. This GDP growth is a significant improvement from a decline of 16 percent in 2020 that corresponded to a loss of more than $2 billion in real GDP.
The economy is projected to expand by eight percent in 2022. The country’s economic future depends on the government’s ability to revive the tourism industry, diversify the economy, attract foreign direct investment, manage debt obligations, and demonstrate fiscal responsibility. The government also reports a strong pipeline of investment proposals in tourism, renewable energy, airport and infrastructure development, mining, and agriculture. The IMF predicts it will likely take until 2024 to return to the 2019 level of GDP, and the pandemic has given rise to significant human and social costs. The IMF also contends the country’s medium-term growth challenges are likely worse than before, and public finances are in a more precarious state. Risks have skewed upwards due to near-term financing limitations, rising inflation, the ongoing pandemic threat, and the country’s high vulnerability to natural disasters.
Close ties to the United States: The United States and The Bahamas share deep political, economic, and cultural ties. The Bahamas is an English-speaking country with a population of approximately 400,000, with extensive air, maritime, and communications links to the United States. There are approximately twenty-five daily flights between The Bahamas and the United States. U.S. Customs and Border Protection operates a pre-clearance facility in Nassau offering ease of travel for the approximately seven million tourists each year. Strong business ties grant U.S. companies access to markets.
Trade preferences are available:
The Bahamas is a member of the Caribbean Community (CARICOM), a beneficiary under the United States’ Caribbean Basin Initiative (CBI) and the Caribbean Basin Economic Recovery Act (CBERA), and Canada’s CARIBCAN Program. The country is also party to the Economic Partnership Agreement (EPA) between the European Union and the countries of the Caribbean Forum (CARIFORUM) and the Economic Partnership Agreement (EPA) between the United Kingdom and the countries of CARIFORUM. These agreements provide preferential access for goods produced in The Bahamas to most major markets, which benefits American investment in the export economy. The Bahamas drafted a National Trade Policy in 2022 focused on managing imports, expanding exports, diversifying exports, and strengthening domestic competitiveness, as well as leveraging opportunities from existing trade agreements and preferences, including CBI and CBERA.
The city of Freeport on the island of Grand Bahama is a 233 square mile Free Trade Zone. The Hawksbill Creek Agreement (1955) between the Bahamian government and the Grand Bahama Port Authority (GBPA) - a privately owned organization that oversees the city of Freeport - guarantees that the “special economic zone” can continue to exist until 2054. Businesses operating in Freeport are exempt from most central government taxes (real property, excise, import, and business taxes) and subject to licensing by the GBPA. Additionally, in the aftermath of Hurricane Dorian in September 2019, both Abaco and Grand Bahama were declared Special Economic Recovery Zones (SERZ), which allows residents and businesses to benefit from several additional tax exemptions and incentives. These concessions were recently renewed until 2025.
Strong U.S. market share:
The United States remains The Bahamas’ main trade partner with over 85 percent of imports coming from the United States. U. S. exports to The Bahamas were valued at $2.9 billion in 2021, giving the United States a trade surplus of $2.5 billion. Most Bahamians are familiar with American products given frequent travel to the United States and access to U.S. cable TV. Other main trading partners include China, the United Kingdom, Japan, Panama, Switzerland, Canada, and France.
Political & Economic Environment: State Department’s website for background on the country’s political environment.