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Mr. Serhan Cevik

I. Introduction Tourism is the main engine of economic growth across the Caribbean, creating millions of jobs and generating billions of dollars in exports . In the case of The Bahamas, the economy is extremely dependent on fast-growing tourism, which contributes—directly and indirectly—about 48 percent of GDP and 56 percent of employment, respectively. According to the World Travel and Tourism Council, the share of tourism is projected to reach 60 percent of GDP and 70 percent of the workforce by 2030. Tourist arrivals to The Bahamas has increased by 9

Mr. Serhan Cevik
The widespread availability of internet search data is a new source of high-frequency information that can potentially improve the precision of macroeconomic forecasting, especially in areas with data constraints. This paper investigates whether travel-related online search queries enhance accuracy in the forecasting of tourist arrivals to The Bahamas from the U.S. The results indicate that the forecast model incorporating internet search data provides additional information about tourist flows over a univariate approach using the traditional autoregressive integrated moving average (ARIMA) model and multivariate models with macroeconomic indicators. The Google Trends-augmented model improves predictability of tourist arrivals by about 30 percent compared to the benchmark ARIMA model and more than 20 percent compared to the model extended only with income and relative prices.
Mr. Krishna Srinivasan, Ms. Inci Ötker, Ms. Uma Ramakrishnan, and Mr. Trevor Serge Coleridge Alleyne

tourism promotion that started with the Tourism Encouragement Act of 1851—it was the U.S. embargo on Cuba that provided “the main stimulus to the tourism industry,” with U.S. tourists switching to The Bahamas ( The Bahamas Ministry of Tourism 2016 ). Tourist arrivals to The Bahamas grew from about 150,000 in 1954 to more than a million in 1968. Mexico also followed suit with the directed development of Cancun as a tourism destination. Just as the closing of U.S.-Cuba relations was a boon to other Caribbean tourism destinations, could the normalization of U

Mr. Sebastian Acevedo Mejia, Mr. Trevor Serge Coleridge Alleyne, and Rafael Romeu

; however, by 1980 Cuba had less than 3 percent of the market compared to the same set of countries. 2 In the case of The Bahamas despite a long history of tourism promotion that started with the Tourism Encouragement Act of 1851, it was the US embargo on Cuba that provided “the main stimulus to the tourism industry” with much of the US tourists switching to The Bahamas ( The Bahamas Ministry of Tourism, 2016 ). Tourist arrivals to The Bahamas went from 142,689 in 1954 to over a million in 1968. It is also not surprising that in 1967 the Mexican government recognizing

Mr. Sebastian Acevedo Mejia, Mr. Trevor Serge Coleridge Alleyne, and Rafael Romeu
The Cuban revolution and the subsequent US embargo on Cuba helped shape the tourism sector in the Caribbean, facilitating the birth and growth of alternative destinations. Therefore, the apprehension of the Caribbean tourism industry towards a change in US travel policy to Cuba is understandable, but likely unwarranted. The history of tourism in the region has shown that it is possible for all destinations to grow despite large changes in market shares. Our estimations show that liberalizing US-Cuba tourism could result in US arrivals to Cuba of between 3 and 5.6 million, most of it coming from new tourists to the region. We also identify the destinations most at risk of changes in US-Cuba relations.
International Monetary Fund

, suggests that stopover arrivals will grow by 2 and 5 percent (y-o-y) in 2010 and 2011, conditional on the current projection for growth in the U.S. However, this forecast depends also on U.S. employment conditions. To illustrate, the model shows that a one-percentage point increase in the unemployment rate, would reduce stopover arrivals to The Bahamas by about 4.5 percent over two years. This result suggests that it would be prudent to be prepared for a sustained period of subdued growth, and make contingency plans in case downside risks materialize. Accumulated

International Monetary Fund. Western Hemisphere Dept.

. The Bahamas: Risk Assessment Matrix 1 Main Threats Likelihood of Realization of the Threat Expected Impact if Threat Materialized Policy Response 1. Protracted period of slower growth in advanced economies High Lower-than-anticipated potential growth and persistently low inflation from a failure to fully address crisis legacies, leading to secular stagnation and lower commodity prices. Weaker recoveries in advanced countries, especially the U.S. which accounts for 80 percent of tourism arrivals to The Bahamas will undermine growth

International Monetary Fund
The Bahamas depends heavily on tourism and financial services. Executive Directors have commended the strong track record of prudent macroeconomic management, but have encouraged the government to broaden the domestic tax base, reduce distortions, increase the resilience of revenues to shocks, and specify contingency measures to reign in the growth in public debt. Greater transparency will underpin the medium-term fiscal strategy, and a higher international reserve coverage will help reduce vulnerabilities. Measures under way to strengthen the financial system have been commended.
International Monetary Fund. Western Hemisphere Dept.
Context. Economic activity strengthened somewhat in 2014 while the external current account deficit worsened primarily as a result of Baha Mar construction-related imports. The authorities continue to make substantial progress on fiscal consolidation with successful VAT implementation in January 2015 setting the stage for continued improvements in the fiscal position. Lower oil prices helped keep inflation anchored in 2014. Still, notwithstanding the capital flow management (CFM) regime, international reserves remain low. Key policy advice: Despite the U.S. recovery and the imminent opening of the Baha Mar resort, the growth outlook remains well below pre-global crisis levels, and strong and timely measures should be implemented to strengthen competitiveness and raise potential growth. In addition, rebuilding fiscal and external buffers will be essential for sustaining macroeconomic stability: • Reigniting strong and inclusive medium-term growth. Structural reforms are needed to address longstanding competiveness issues including labor market impediments to growth. Energy sector reforms could substantially lower energy costs, boost productivity and facilitate economic diversification in the medium term. A diversification strategy should explore the potential for increasing value added in the tourism sector, including through deepening linkages with agriculture. • Rebuilding fiscal and external buffers. Notwithstanding the CFM regime, the fixed exchange rate peg constrains monetary policy, leaving fiscal policy as the main instrument for macroeconomic stabilization. Steadfast implementation of the VAT and expenditure rationalization in the context of a medium-term budgetary framework, together with public enterprise reforms, would help rebuild fiscal buffers and support international reserves. • Preserving financial sector stability. The pre-crisis credit boom has left the banking system with an overhang of non-performing loans, which will likely continue to generate headwinds for the economy. Despite this, the banking system remains very well capitalized and liquid. Measures should be put in place to resolve the debt overhang while further strengthening the regulatory and supervisory framework.