Full Breakdown
Bermuda's Economic Challenges: Insights from Nathan Kowalski
11/25/2025, 2:31:05 PM
Overview of Economic Trends
At the Association of Bermuda International Companies (ABIC) annual meeting, Nathan Kowalski, chief financial officer and chief economist at Anchor Investment Management, presented a detailed analysis of Bermuda's economic outlook for 2026 and beyond. He emphasized the interconnected challenges posed by the island's shrinking and aging population, a housing shortage, the growth of international business (IB), and advancements in artificial intelligence (AI). Kowalski noted that IB has become a crucial driver of job growth in Bermuda, now accounting for over 40% of employment income, a significant increase from 15% in 1997.
Demographic Shifts and Workforce Implications
Kowalski highlighted alarming demographic statistics, revealing that 54.3% of Bermuda's 34,000 jobholders are over 45 years old, with 9% over 65. This demographic shift has resulted in healthcare costs rising, as the number of deaths (622 in 2023) outpaces births (330). He asserted that reversing emigration and enhancing immigration will be essential to counteract the rapid population decline. Kowalski stated, “We will never solve the population challenges and the housing challenge at the same time,” indicating the complexity of addressing these issues concurrently.
Housing Affordability Crisis
The economist pointed to a housing affordability crisis exacerbated by reduced inventory, influenced by the "Airbnb effect," and slow increases in housing supply. Kowalski's analysis suggests that without a significant expansion of the workforce, Bermuda will need to rely on productivity increases to sustain economic growth. He reported that productivity growth has improved to 2.7% over the past five years, despite a 12% decline in gross value added since 2007 and an 18% decrease in total employment.
The Role of Artificial Intelligence
Kowalski also discussed the potential impact of AI on the job market, referencing a report by McKinsey that predicts generative AI will significantly affect higher-wage knowledge workers. He cautioned that while Bermuda's job retention may limit automation's scope, approximately half of the jobs could still be at risk. “The trade-off here is productivity might accelerate but it may come at the expense of less job growth,” he noted.
Fiscal Responsibility and Future Planning
On the topic of corporate income tax revenue, Kowalski advocated for a transparent approach, suggesting that revenue should be separately accounted for and used to address Bermuda's $3.2 billion debt and to establish a sovereign wealth fund. He expressed concern for future generations, stating, “Unfortunately, I don't think we think about the next generation enough. They didn’t accrue the $3.2 billion debt.” Kowalski's insights underscore the need for strategic planning to secure a sustainable economic future for Bermuda.
Conclusion
Kowalski's presentation at the ABIC AGM sheds light on the multifaceted economic challenges facing Bermuda, emphasizing the urgent need for policy adjustments to address demographic shifts, housing shortages, and the implications of technological advancements. As the island navigates these complexities, the focus on long-term sustainability and fiscal responsibility will be crucial for its economic resilience.
