Bermuda - Market OverviewBermuda - Market Overview
Bermuda’s economy relies on foreign direct investment (FDI), primarily international business (IB) – insurance and reinsurance – along with general financial services. Tourism also brings in foreign exchange, but to a much lesser degree. IB is Bermuda’s economic foundation, contributing directly 27.1% of total GDP in 2014 - compared to tourism’s contribution of approximately 5%.
Bermuda is slowly coming out of more than six straight years of economic recession. The GOB expects overall GDP in 2015 to have increased by 1.5-2.5%. Bermuda’s real GDP increased for the fourth consecutive quarter in Q3 2015, a 4.4% increase over the same period in 2014 after adjusting for inflation of 1.8%. In 2014, the last full year for which data was available, GDP was at USD 5.7 billion, or USD 4.6 billion after adjusting for inflation, down 0.4 percent from 2013. The primary driver was a $53 million gain in the surplus on trade in goods and services, primarily from household consumption, which increased 3.8%. However, job losses and business closures continue to affect the overall economy. In February 2016, the GOB reported that it borrowed USD 150 million in FY 2015-16 to cover fiscal shortfalls and announced that it expects to borrow another USD 110 million this year; in addition to the USD 800 million it borrowed in 2013 to cover deficits for 2014-16 period. By March 31, 2017, the GOB estimates that gross public debt will stand at USD 2.444 billion.
In February 2016, Moody’s reported that the GOB “remains on track to meet its fiscal consolidation goals, a credit positive…The Government’s success in reducing the budget deficit reflects its increased efforts to maintain fiscal discipline and a moderate economic rebound that too hold in 2015 following a six-year recession.” Moody’s also noted that the international business sector has resumed growth, which, with infrastructure investment, will create new jobs and grow wages and payroll tax receipts. Moody’s downgraded Bermuda’s macro profile from “moderate+” to “moderate” in April, 2016 which reflects “a balance of Bermuda’s very high institutional strength and a limited susceptibility to event risk, against the challenges of a small economy with limited diversification and poor growth of recent years.”
Reinsurance is the island’s primary economic driver. Fitch Ratings’ January 2016 report, “Bermuda 2016 Market Update,” gave a stable rating outlook on global reinsurance, including in Bermuda. However, Fitch expected prices to continue to fall in 2016 while investment yields will remain close to historic lows. Fitch noted that the European Commission awarded Bermuda full equivalency with Solvency II, which was formally implemented on Jan. 1, 2016, “enhancing Bermuda’s global competitiveness.”
In May 2015, Fitch reaffirmed Bermuda's A+ rating with a stable outlook. It said Bermuda's ratings are supported by its “high income, consistent current account surpluses and strong net external creditor position,” along with its sophisticated legal system, strong regulatory framework, simple tax regime, proximity to the U.S., and skilled human capital which, it said, will allow Bermuda to continue to compete as a domicile for re/insurance and financial services companies. Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.
Bermuda Trade Development and Promotion