Central Bank Financial Developments

Indications are that the domestic economy maintained its mildly positive growth pace during the review month, supported by stable foreign investment-led construction activity, amid some softness in tourism output. Inflationary pressures remained subdued, as domestic energy costs contracted in December. The fiscal situation deteriorated over the first five months of FY2012/13, as broad-based gains in aggregate spending outpaced the tax-led rise in total receipts. In the monetary sector, foreign currency proceeds from Government’s external bond issue buoyed both bank liquidity and external reserves over the review month; however, heightened demand for foreign currency, and softness in receipts from real sector activities contributed to a net decline in reserves over the year.

Preliminary data for the eleven months to November showed total visitor arrivals increasing by 6.3% to 5.3 million, outpacing the 4.6% gain of 2011. The high value-added air segment improved by 8.0% to 1.2 million visitors, supported by the ongoing economic recovery in key source markets and domestic incentive programmes, and the dominant sea passenger component was higher by 5.8% at 4.1 million. By port of entry, visitors to New Providence strengthened by 10.0%, outdistancing the year-earlier 0.9% increase, and was attributed to firming in both air and sea traffic. However, the rise in Grand Bahama’s arrivals slowed to 1.9% from 4.4%, as weakness in sea passengers eclipsed the upturn in air traffic. Similarly, broad based slowing limited the gains in Family Island visitors to 2.1% from 11.7%.

Provisional hotel performance indicators, obtained from a sample of major New Providence and Paradise Island hotels, showed room revenues lower by 2.0% in December, year-on-year, owing primarily to a 0.3 of a percentage point decrease in the average occupancy rate to 58.0%, which overshadowed the 1.4% gain in the average daily room rate to $274.46. However, buoyed by a favourable first half performance, overall room revenues grew by 4.0% in 2012, as the average occupancy rate improved by 4.3 percentage points to 68.3%, and negated the 3.0% reduction in average daily room rate to $229.24.

Price developments in December included a decrease in domestic fuel costs, for the second consecutive month, as average gasoline and diesel prices moved lower by 6.9% to $5.10 per gallon and by 3.2% to $5.16 per gallon, respectively. In comparison to end-2011, both gasoline and diesel costs were only higher by 1.0% and 0.4%, respectively. With regards to energy costs, the Bahamas Electricity Corporation’s fuel charge fell by 3.7% over the month and by 3.6% vis-à-vis last year, to 25.34¢ per kilowatt hour (kWh).

The Government’s overall deficit for the first five months of FY2012/13 firmed by $70.3 million (46.7%) to $220.9 million over the corresponding period a year earlier, based on a $90.7 million (14.2%) expansion in total spending to $729.8 million, which outpaced the $20.4 million (4.2%) growth in total revenue to $509.0 million. Tax collections rose by $17.7 million (4.1%) to $447.4 million, led by a timing-related $9.6 million (26.5%) increase in departure taxes and a $7.0 million (2.8%) gain in taxes on international trade. Non-tax receipts also grew, by $2.8 million (4.7%) to $61.6 million, owing mainly to a rise in miscellaneous income sources. Spending was led by broad-based gains in current outlays, of $20.1 million (3.3%) to $623.4 million, while the $24.5 million (40.4%) hike in capital disbursements to $85.0 million, was dominated by a $13.6 million (25.7%) firming in infrastructure outlays. The deficit for the five month period was financed by $325 million in Bahamas Government Registered Stock, $30 million in local currency short-term advances and $28 million in external drawings. At end-November 2012, the Government’s direct indebtedness stood at $4,230.7 million-a gain of 11.2% over the comparable period a year earlier.