Parts of this article (those related to the history of the economy since 2009) need to be updated. Please help update this article to reflect recent events or newly available information.(September 2013)
Bermuda now has the fourth highest per capita incomes in the world,[2] primarily fueled by offshore financial services for non-resident firms, especially offshore insurance and reinsurance, and tourism. In 2014, 584,702 tourists visited the territory. Tourism accounts for an estimated 28% of gross domestic product (GDP), 85% of which is from North America. The industrial sector is small, and agriculture is now severely limited by a lack of suitable land. About 80% of food is imported. International business contributes over 60% of Bermuda's economic output. A failed independence vote in late 1995 can be partially attributed to Bermudian fears of scaring away foreign firms. Government economic priorities are for further strengthening of the tourist and international financial sectors.
History
Early-Season Vegetable Exports to USA Before World War II
Onion cultivations on Bermuda, 1895One of the over 200 Bermuda lily fields in 1926Lawrence Ogilvie in his laboratory
The major Bermuda industry since the 1800s was the export by sea of early vegetables and flowers to New York: Bermuda had three crops per year. The Bermuda Botanic Gardens (now with 38 acres) had been established in 1898.
In 1922, complete, concise and clear acts dealing with agriculture were placed on the Bermuda statute book; inspection of produce was initiated; and seed testing began. Local seedsmen were registered in 1923. Mr McCallan, the Agricultural Director, reorganised the Agricultural Exhibition for 1923. Seed potatoes were gradually improved after much investigation with US experts. A local farmers' market started in 1923. For a year in 1921–23, Professor H H Whetzel[3] of Cornell University advised remedies for the cash crop diseases of potato blight, onion thrips, celery leaf spot, lily Botritis, melon mildew etc. He suggested that the colony should appoint a full-time plant pathologist. During this time, exports of agricultural products to the United States contributed the most to Bermuda's economy.
Lawrence Ogilvie from Scotland was the Government's plant pathologist from September 1923 to April 1928. He introduced regulations in 1924 governing the control of local diseases and pests, and the import of plants – so vital for an island. Import embargoes applied for banana plants, lily bulbs, sweet potatoes, citrus fruits from the West Indies, and certain Irish potatoes. In 1924 a concrete fumigation chamber was built to fumigate infected imports. Good crops of celery were achieved in the 1920s. Citrus cultivation was affected by the Mediterranean fruit fly and only really developed in 1944.
1890s to 1920s Economy Badly Affected by Lily Virus in Over 200 Fields
The early Easter-lily bulb exports to New York and the Isle of Man — high-value and vital financially to Bermuda — became badly diseased from the late 19th century to the mid-1920s. In 1924 Lawrence Ogilvie (age 25) saved the industry by identifying the problem as a virus (not aphid damage as previously thought) and instituting controls in the fields and packing houses. There was a marked improvement in exporting 23 cases of lily bulbs in 1918 to 6043 cases in 1927 from the then 204 lily fields.[4] Still in his 20s, Ogilvie was professionally honoured by an article in Nature.[5] The lily export trade continued to flourish until the 1940s when the Japanese captured much of the market.
After World War II
Bermuda has had steady economic prosperity since the end of World War II, although the island has experienced recessions, including during the early 1990s, when the contraction of the economy led to a population reduction of 2,000 people (with work permits of many long-term residents not being renewed), and a mild recession in 2001–02, both paralleling recessions in the United States. Its economy is based primarily upon international business (especially re-insurance, for which it is now a world centre) and tourism, with those two sectors accounting for more than 70% of the total balance of payments current account foreign exchange receipts. However, the role of international business in the economy is expanding, whereas that of tourism is contracting.
Current economy
The Bermuda Monetary Authority (BMA) is an independent regulator of Bermuda's financial services sector, including the Bermuda Stock Exchange. The BMA is not a central bank, and does not provide lender of last resort facilities. The BMA has licensed two local banks: Butterfield Bank and the HSBC Bank Bermuda. In 2009, Butterfield had 51% of local deposits and HSBC had 41%.[6] Bermuda's currency is the Bermudian dollar, which is pegged to the US dollar on a one-to-one basis. Both currencies circulate in Bermuda on an equal basis, but the Bermudian dollar is not normally traded outside the territory. In May 2020 the Bermuda Government's debt stood at $2.68 billion and the debt limit was increased to $2.9 billion in response to COVID-19 related expenditures.[7] The BMA implemented Basel II in Bermuda from 1 January 2009 and Basel III from 1 January 2015, combined becoming the final rules for the enhancement of capital adequacy and liquidity in Bermuda's banking sector.[8]
In 2000, 19% of the population lived below the poverty line. The inflation rate (consumer prices) in 2005 was 2.8%. In 2004, 19% of the total labour force of 38,360 was in clerical occupations, 22% services, 3% labourers, 17% professional and technical, 15% administrative and managerial, 19% sales, and 3% agriculture and fishing; there was an unemployment rate of 2.1%.
In 2006, Bermuda's exports (mostly reexports of pharmaceuticals) were valued at $783m; export partners included Spain (13.8%), Germany (11.7%), Switzerland (8.8%), Denmark (6.6%), and the UK (6%).
In 2007, imports (of clothing, fuels, machinery and transport equipment, construction materials, chemicals, food, and live animals) were valued at $1.162bn; import partners included South Korea (36.4%), the US (15.7%), Germany (13.2%) and Italy (11.8%).
In 2018, Bermuda had a GDP of $7.263bn, and the GDP per capita was $111,540, with a real growth rate of 1.7%. In 2018 (est.), agriculture contributed 0.3% to GDP, industry 5%, and services 94.2%.[9] In 2018/19 actual government revenues were $1,090 million with a deficit of $77.8 million after $58.6 million capital expenditure[10] The major sources of Government revenue were: $467 million payroll tax and $226 million customs duties. Between 2008 and 2014 debt rose by 20% or more every year.[11] By 2020 net borrowings were $2.586 billion.[9] In September 2020 it was reported that "Bermuda faces a fiscal cliff if its debt-to-revenue ratio, currently at 340 per cent, continues to rise."[12] Annual debt interest is $127.1 million. $354 million of debt matures in January 2023. A further $402 million of debt matures in February 2024.[12]
An October 2000 KPMG report titled "Review of Financial Regulation in the Caribbean Overseas Territories and Bermuda" stated that the island's legislative framework was not compliant with international standards, which led critics to conclude that Bermuda is committed to the facilitation of money laundering and other financial crimes. The Bermuda Government has since signed tax transparency and compliance agreements with the United States and Seychelles.[15]
In response to the KPMG October 2000 report, Bermuda enacted the Trust (Regulation of Trust Business) Act 2001 to transfer the finance minister's responsibilities to the BMA, with respect to granting and revoking trust company licences. It also requires all individuals or companies operating trust companies to have a licence unless they are exempt. Previously, only trust companies needed a licence. Additionally, the legislation gives the BMA more comprehensive intervention powers. It will be able to request more detailed documentation and, in the event of a problem, restrict a trust operator's licence. Information should be kept confidential, except in the event of a criminal investigation.
Comprehensive new legislation [clarification needed] will be introduced in the upcoming[when?] parliamentary session to further streamline the incorporation process, facilitate registration of foreign names and address conflicts in law for registered securities, again consistent with the KPMG report. Amendments are being proposed to the BMA (Collective Investment Scheme Classification) Regulations 1998, part of a strategic plan for the development of financial services in Bermuda.
Foreign companies
Most foreign companies in Bermuda are incorporated under the Companies Act of 1981. Bermuda-registered companies need only one director and one shareholder, who can be the same person, and neither needs to be resident in Bermuda. Most companies do not need to file financial accounts or annual returns. Business records can be maintained outside the territory. A company need only file an annual declaration, which lists the authorized share capital, which is the basis for determining the annual fee. (See Taxation in Bermuda#Licence fees.) Foreign companies require a local secretary and agent, which charges a fee. Foreign companies that wish to establish a place of business in Bermuda require a permit, but a permit is not required for offshore activities. There are no taxes on profits, income, dividends, capital gains, estate, or death duties.
There are more than 12,500 foreign companies registered in Bermuda, many US-owned, which are an important source of foreign exchange for the island. Offshore companies spent US$967m in Bermuda in 2000. Total income, including secondary effects, was US$1.3bn. Many large international companies are based in Bermuda, including Bacardi Ltd., Bunge Limited, Jardine Matheson Holdings Ltd., Global Crossing Ltd. and Royall Lyme Bermuda Ltd. Some companies, however, are considering or planning a move to Ireland in search of "a more stable environment", including Willis Group.[16]
The growing importance of international business is reflected in its increased share of GDP, which grew from 12.6% in 1996 to 13.8% in 2000. In 2000, foreign companies directly employed 3,224 Bermudians and non-Bermudians. Foreign companies directly and indirectly supported 9,450 jobs in Bermuda and strongly influenced a further 4,670.
The Bermuda Department of Maritime Administration maintains an open ship registry,[17] enabling foreign-owned ships to be registered in Bermuda, fly its flag, and be subject to its maritime and taxation laws. It is considered a flag of convenience state. In 2012, 139 vessels were registered in Bermuda[18] of which 105 were foreign-owned[18] (76%). 160 ships were registered in 2017, including 18 oil tankers, 10 bulk carriers, 8 container ships, and one general cargo ship.[18] Thirteen of the 17 ships of the Princess Cruises line are registered in Bermuda, as are seven of the eight ships of the P&O Cruises line. In 2011, the Cunard Line registered all its ships in Bermuda to enable its ship captains to marry couples at sea, weddings at sea being described as a lucrative market. The move brought in additional hundreds of thousands in annual fees to a registry that already takes in about $3 million a year.[19][20]
Tourism is Bermuda's third most important industry. That it is an industry in trouble is evident from the statistical comparison. In 1996, Bermuda had 571,700 visitors. By 2000, that figure has dropped to 538,059 visitors, and further decreased to 454,444 visitors in 2001. Bed nights sold declined from over 2.4 million in 1995 to 1.9 million in 2001. Visitors contributed an estimated $475 million to the economy in 1996, but that figure declined to $431 million in 2000. Direct employment in the tourism industry (5,700 jobs in 2000) and related industry is dropping in tandem with declining visitor numbers.
Following the September 11, 2001 attacks in the United States, a number of new re-insurance companies located to the island, contributing to an already robust international business sector. On the other hand, Bermuda's already weakening tourism industry was hit hard, as American tourists chose not to travel.
Total arrivals in 2014 were 584,702 out of which air arrivals were 224,329 (down by 5.1%), cruise arrivals were 356,093 (up by 4.7%), and yacht arrivals were 4,280 (up by 24.6%).
In 2018, Bermuda experienced its most visitor arrivals ever with a record number of 770,683 visitor arrivals. With 203,697 leisure air arrivals in 2018, Bermuda experienced its best performance since 2002, a year which recorded 218,248 leisure travellers by air. Total leisure spending between air and cruise was $411 million in 2018, up from $320 million in 2017. Cruise arrivals were also up by 34% in 2018 for non-summer months (September through May).[21]
Population and labour
The population of Bermuda on census night, 20 May 2010, was 71,328 persons (an increase of 7% over 2000), comprising 59,014 civilians, 822 persons in institutions and 11,492 visitors and transients (an increase of 38%), including those on board cruise ships and yachts. There were 64,319 persons usually resident in Bermuda (i.e., including those temporarily out of the territory), an increase of 4% or 2,178 persons. About 79% of Bermuda's 2010 resident population has Bermudian status and 21% does not. Bermudian status arises by birth, grant or marriage. There were three cruise ships in Bermuda on census night compared to one at the 2000 census.[22] According to the 1991 census, about 73% of Bermuda's 1991 resident population was born in Bermuda and 27% was foreign-born. UK immigrants constituted 30.6% of the immigrant population; U.S., 19.9%; Canada, 10.5%; and Portugal and the Azores, 13.5%. In 2016 Bermuda had a resident population of 65,331.[1]
Total filled jobs in 2000 were 38,017, but preliminary estimates for 2001 revealed a 1.1% decline in employment. Nevertheless, unemployment remained in the 4% range, and many Bermudians held more than one job. In 2000, about 25% of workers were union members. There are three primary unions in Bermuda: the blue-collar Bermuda Industrial Union, Bermuda's largest labour organisation; the professional Bermuda Public Services Association, with a steadily increasing membership; and the Bermuda Union of Teachers, which is affiliated with the Caribbean Union of Teachers.
Organised labour enjoys a high profile in Bermuda. Union action, however, was moderate in recent years. The average days lost per worker involved dropped from a high of 65 in 1991 to a low of 0.8 in 1999. Although still active, unions have tempered their demands, partly as a result of new labour legislation and partly in recognition that Bermuda's economy, in line with that of the United States, entered a recessionary phase in 2001. The island's tourism industry, in which many Bermudians have historically been employed, continues to experience tough times, made even worse by 11 September. Past industrial action in the tourism sector hurt that industry, which was already suffering a chronic downturn without the additional blow of tourist displeasure and displacement due to work stoppages.
Foreign trade
Bermuda has little in the way of exports or manufacturing, and almost all manufactured goods and foodstuffs must be imported. The value of imports continues to rise, up from US$551m in 1994 to US$712m in 1999. The U.S. is Bermuda's primary trading partner; from a value of US$400m in 1994, U.S. imports expanded to US$533m in 2000. The United Kingdom, Canada, Seychelles and the Caribbean countries (mainly the Netherlands Antilles) also are important trading partners. Exports from Bermuda, including imports into the small free port, which are subsequently re-exported, increased from US$35m in 1993 to almost US$51m in 1999.
Duty on imports is a major source of revenue for the Government of Bermuda. In fiscal year 1998–99, the government obtained slightly more than $166 million, or about 30% of its revenue base from imports. Heavy importation duties are reflected in retail prices. Although Bermuda imposes no income, sales, or profit taxes, it does levy a real estate tax and a payroll tax.
The economy of the Bahamas is dependent upon tourism and offshore banking. The Bahamas is the richest country in the West Indies and is ranked 14th in North America for nominal GDP. It is a stable, developing nation in the Lucayan Archipelago, with a population of 391,232 (2016). Steady growth in tourism receipts and a boom in construction of new hotels, resorts, and residences had led to solid GDP growth for many years. The slowdown in the Economy of the United States and the September 11 attacks held back growth in these sectors from 2001 to 2003.
The economy of the British Virgin Islands is one of the most prosperous in the Caribbean. Although tiny in absolute terms, because of the very small population of the British Virgin Islands, in 2010 the Territory had the 19th highest GDP per capita in the world according to the CIA World factbook. In global terms the size of the Territory's GDP measured in terms of purchasing power is ranked as 215th out of a total of 229 countries. The economy of the Territory is based upon the "twin pillars" of financial services, which generates approximately 60% of government revenues, and tourism, which generates nearly all of the rest.
The economy of the Cook Islands is based mainly on tourism, with minor exports made up of tropical and citrus fruit. Manufacturing activities are limited to fruit-processing, clothing and handicrafts.
The economy of Nauru is tiny, based on a population in 2019 of only 11,550 people. The economy has historically been based on phosphate mining. With primary phosphate reserves exhausted by the end of the 2010s, Nauru has sought to diversify its sources of income. In 2020, Nauru's main sources of income were the sale of fishing rights in Nauru's territorial waters, and revenue from the Regional Processing Centre.
The economy of Nicaragua is focused primarily on the agricultural sector. Nicaragua itself is the least developed country in Central America, and the second poorest in the Americas by nominal GDP. In recent years, under the administrations of Daniel Ortega, the Nicaraguan economy has expanded somewhat, following the Great Recession, when the country's economy actually contracted by 1.5%, due to decreased export demand in the American and Central American markets, lower commodity prices for key agricultural exports, and low remittance growth. The economy saw 4.5% growth in 2010 thanks to a recovery in export demand and growth in its tourism industry. Nicaragua's economy continues to post growth, with preliminary indicators showing the Nicaraguan economy growing an additional 5% in 2011. Consumer Price inflation have also curtailed since 2008, when Nicaragua's inflation rate hovered at 19.82%. In 2009 and 2010, the country posted lower inflation rates, 3.68% and 5.45%, respectively. Remittances are a major source of income, equivalent to 15% of the country's GDP, which originate primarily from Costa Rica, the United States, and European Union member states. Approximately one million Nicaraguans contribute to the remittance sector of the economy.
The economy of Palau consists primarily of subsistence agriculture and fishing. The government is the major employer of the work force, relying heavily on financial assistance from the United States. The population enjoys a per capita income of more than twice that of the Philippines and much of Micronesia. Long-term prospects for the tourist sector have been greatly bolstered by the expansion of air travel in the Pacific and the rising prosperity of leading East Asian countries.
Once a single-crop agricultural economy, Saint Lucia has shifted to a tourism and banking serviced-based economy. Tourism, the island's biggest industry and main source of jobs, income and foreign exchange, accounts for 65% of its GDP. Agriculture, which was once the biggest industry, now contributes to less than 3% of GDP, but still accounts for 20% of jobs. The banana industry is now on a decline due to strong competition from low-cost Latin American producers and reduced European trade preferences, but the government has helped revitalize the industry, with 13,734 tonnes exported in 2018. Agricultural crops grown for export are bananas, mangoes, and avocados. The island is considered to have the most diverse and well-developed manufacturing industry in the eastern Caribbean.
The economy of Samoa is dependent on agricultural exports, development aid and private financing from overseas. The country is vulnerable to devastating storms, earthquakes, tsunamis. Agriculture employs two-thirds of the labor force, and furnishes 9% of exports, featuring coconut cream, coconut oil and copra. Outside a large automotive wire harness factory, the manufacturing sector mainly processes agricultural products. Tourism is an expanding sector; more than 70,000 tourists visited the islands in 1996 and 120,000 in 2014. The Samoan Government has called for deregulation of the financial sector, encouragement of investment, and continued fiscal discipline. Observers point to the flexibility of the labor market as a basic strength factor for future economic advances.
The economy of Seychelles is based on fishing, tourism, processing of coconuts and vanilla, coir rope, boat building, printing, furniture and beverages. Agricultural products include cinnamon, sweet potatoes, cassava (tapioca), bananas, poultry and tuna.
Vanuatu's economy is primarily agricultural; 80% of the population is engaged in agricultural activities that range from subsistence farming to smallholder farming of coconuts and other cash crops.
The economy of Fiji is one of the most developed among the Pacific islands. Nevertheless, Fiji is a developing country endowed with forest, mineral and fish resources. The country has a large agriculture sector heavily based on subsistence agriculture. Sugar exports and the tourism industry are the main sources of foreign exchange. There are also light manufacturing and mining sectors.
The government of the Marshall Islands is the largest employer, employing 30.6% of the work force, down by 3.4% since 1988. GDP is derived mainly from payments made by the United States under the terms of the amended Compact of Free Association. Direct U.S. aid accounted for 60% of the Marshall Islands' $90 million budget.
The economy of the Comoros is based on subsistence agriculture and fishing. Comoros has inadequate transportation links, a young and rapidly increasing population, and few natural resources. The low educational level of the labor force contributes to a subsistence level of economic activity, high unemployment, and a heavy dependence on foreign grants and technical assistance. The Comoros, with an estimated gross domestic product (GDP) per capita income of about $700, is among the world's poorest and least developed nations. Although the quality of the land differs from island to island, most of the widespread lava-encrusted soil formations are unsuited to agriculture. As a result, most of the inhabitants make their living from subsistence agriculture and fishing. Average wages in 2007 hover around $3–4 per day.
The economy of Saint Kitts and Nevis has traditionally depended on the growing and processing of sugar cane; decreasing world prices have hurt the industry in recent years. Tourism, export-oriented manufacturing, and offshore banking activity have assumed larger roles in Saint Kitts and Nevis. Most food is imported. The government has undertaken a program designed to revitalize the faltering sugar sector. It is also working to improve revenue collection in order to better fund social programs. In 1997, some leaders in Nevis were urging separation from Saint Kitts on the basis that Nevis was paying far more in taxes than it was receiving in government services, but the vote on cessation failed in August 1998. In late September 1998, Hurricane Georges caused approximately $445 million in damages and limited GDP growth for the year.
The economy of Dominica is reliant upon agriculture, particularly bananas, with the financial services industry and passport sales becoming increasingly the island's largest source of income. Banana production employs, directly or indirectly, upwards of one-third of the work force. This sector is highly vulnerable to weather conditions and to external events affecting commodity prices. The value of banana exports fell to less than 25% of merchandise trade earnings in 1998 compared to about 44% in 1994.
Since the island country's independence in 1966, the economy of Barbados has been transformed from a low-income economy dependent upon sugar production into a high-income economy based on tourism and the offshore sector. Barbados went into a deep recession in the 1990s after 3 years of steady decline brought on by fundamental macroeconomic imbalances. After a painful re-adjustment process, the economy began to grow again in 1993. Growth rates have averaged between 3%–5% since then. The country's three main economic drivers are: tourism, the international business sector, and foreign direct-investment. These are supported in part by Barbados operating as a service-driven economy and an international business centre.
The United Kingdom is formally responsible for Bermuda's foreign and defense policy. American policy toward the United Kingdom is the basis of US–Bermudian relations. In the early 20th century, as modern transportation and communication systems developed, Bermuda became a popular destination for wealthy American, British, and Canadian tourists. While the tariff enacted in 1930 by the US against its trading partners ended Bermuda's once-thriving agricultural export trade – primarily fresh vegetables to the US, it helped spur the overseas territory to develop its tourist industry, which is second only to international business in terms of economic importance to the island.
Algeria's economy continued to recover in the first half of 2022, led by a return of oil production to pre-pandemic levels and a continued recovery of the service sector along with a more vigorous agricultural activity. The recovery should continue into 2023, supported by the nonhydrocarbon sector and public expenditure growth, according to the latest edition of the World Bank's Algeria Economic Update.
The economy of Antigua and Barbuda is service-based, with tourism and government services representing the key sources of employment and income. Tourism accounts directly or indirectly for more than half of GDP and is also the principal earner of foreign exchange in Antigua and Barbuda. However, a series of violent hurricanes since 1995 resulted in serious damage to tourist infrastructure and periods of sharp reductions in visitor numbers. In 1999 the budding offshore financial sector was seriously hurt by financial sanctions imposed by the United States and United Kingdom as a result of the loosening of its money-laundering controls. The government has made efforts to comply with international demands in order to get the sanctions lifted. The dual island nation's agricultural production is mainly directed to the domestic market; the sector is constrained by the limited water supply and labor shortages that reflect the pull of higher wages in tourism and construction. Manufacturing comprises enclave-type assembly for export with major products being bedding, handicrafts, and electronic components. Prospects for economic growth in the medium term will continue to depend on income growth in the industrialized world, especially in the US, which accounts for about one-third of all tourist arrivals. Estimated overall economic growth for 2000 was 2.5%. Inflation has trended down going from above 2 percent in the 1995-99 period and estimated at 0 percent in 2000.
The economy of Belize is a small, essentially private enterprise economy that is based primarily on agriculture, tourism, and services. The cultivation of newly discovered oil in the town of Spanish Lookout has presented new prospects and problems for this developing nation. Belize's primary exports are citrus, sugar, and bananas. Belize's trade deficit has been growing, mostly as a result of low export prices for sugar and bananas.
†Physiographically, these continental islands are not part of the volcanic Windward Islands arc, although sometimes grouped with them culturally and politically.
#Bermuda is an isolated North Atlanticoceanic island, physiographically not part of the Lucayan Archipelago, Antilles, Caribbean Sea nor North American continental nor South American continental islands. It is grouped with the Northern American region, but occasionally also with the Caribbean region culturally.
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