Implications of the global credit crisis for the Bahamian economy

The subprime mortgage crisis in the United States has caused significant turbulence in global financial markets, placing a large number of financial institutions at risk of failure and resulting in a sudden reduction in liquidity for the provision of credit to businesses and households. The outward manifestation of the crisis has been the large decrease in equity prices on the major stock markets, weakness in the US dollar and continued prospects for sustained to rising oil and commodity prices. The outlook for the stability of global financial markets hinges on the successful conclusion of an agreement between the US President and the Congress on a financial rescue measure–the major component of which involves the provision of an estimated $700 billion in funds to purchase bad mortgages currently on the books of US banks. This will provide liquid resources to support a resumption in lending to businesses and households, and avert any severe contraction in the US economy. Nevertheless, the continued adjustment to the subprime crisis is expected to have real economic consequences that soften the outlook for the Bahamian economy.