Above: Bermuda (Photo: BT)

By the Caribbean Journal staff

Bermuda’s economy contracted by an estimated rate of between 1.5 and 2.5 percent in 2011, following a 1.9 percent decline in 2010, according to the National Economic Report of Bermuda 2011 released Friday.

“With the global economic outlook deteriorating and financial markets experiencing regular bouts of intense volatility, we anticipate a further decline in 2012 as Bermuda struggles to recover from the global recession of 2008-2009,” the Bermuda Ministry of Finance said in its report.

It was the construction and quarrying sector that contributed the most to the contraction in GDP, falling by 17.9 percent in output, the largest decline for the industry in the past 10 years.

That was accompanied by a 6.1 percent drop in transportation and communications and a 3.6 percent reduction in business activities.

There were some bright spots in the economy, however, including the first annual increase in visitors since 2007, and the largest number of cruise visitors in Bermuda’s history.

The tourism sector was strong for a second year in a row, although buoyed in part by an increase in convention visitors, it said.

Hotel employment grew by 5.4 percent, and air visitors increased by 1.6 percent, according to the Ministry’s report. Hotel occupancy also increased by 4.3 percent in 2011. As a whole, the hotel and restaurants sector improved by 6.5 percent.

The rise in visitors came after 2008 and 2009 saw double-digit reductions in visitors at the onset of the global downturn.

The growth in tourism was accompanied by an improved year for the financial intermediation sector, which grew by 2.2 percent in 2011.

“It was satisfying that, accompanied by the steadying performance of the financial intermediation sector, the tourism sector exhibited strong growth in 2010,” the report said. “This bodes well for the economy as a whole because the indicators for 2011 were also encouraging.”

Although the rise of unemployment in Bermuda has slowed since 2010, the jobless rate continued to fall in 2011, dropping by 1.9 percent to 6 percent.

Bermuda’s insurance market “remained resilient” in 2011, “still achieving significant levels in gross premiums and maintaining health amounts of capital and surplus,” according to the report.

The Ministry said it expected premium growth to moderate in 2012, as above-average losses from natural disasters have resulted in downward pressure on profitability.

Looking forward, the government said it would continue to provide stimulus to the construction sector and create a National Tourism Plan in 2012.

“In light of local indicators and expectations for the US economy and financial market conditions, the Ministry of Finance anticipates that the current economic slowdown will persist through 2012,” the Ministry said in the report. “Taking all of the above information into account, the Ministry of Finance estimates that Bermuda’s GDP will decline in the region of 1 percent to 2 percent in 2012.”

“The lack of a diversified economy weakens the ability of the economy to absorb shocks and make the recovery process less vigorous,” it said.

See the full report here.