The Central Bank of The Bahamas says in its newly released report titled, “Review of Domestic Economic Developments for First Quarter 2005, that indications are that the Bahamian economy continued to strengthen during the first quarter of 2005, in a climate of subdued inflation.
Tourism growth is expected to be strong for the remainder of 2005.
The report also says: increased construction stimulus, from intensifying foreign investment inflows, residential investments and hurricane repairs, outweighed the comparative decrease in tourism output, which remained constrained mainly by the reduced capacity in Grand Bahama.
According to the Bank, capacity constraints, which remained concentrated in Grand Bahama following the September 2004 hurricanes, contributed to a decline in tourism earnings during the first quarter of 2005.
“First quarter visitor arrivals fell by 3.0% to 1.35 million, following robust growth of 13.3% in 2004,” the report says.
“Both air and sea arrivals contracted, by 4.2% and 2.5%, from the year-earlier advances of 7.9% and 15.7%, respectively. In addition to some falloff in cruise earnings, indications are that stopover spending also declined.
“The Ministry of Tourism’s survey indicates that the average nightly room rate gains among large hotel properties, of 9.4% to $177.88, was partly offset by a 6.1% decrease in nightly room sales, consequently constraining estimated room revenue growth at 2.8% from 10.9% in the first quarter of 2004.
“While both New Providence and the Family Islands operated with less rooms and the Family Islands experienced reduced room sales, the capacity constraint was most marked by the one third fewer rooms in Grand Bahama, as a major hotel remained closed since September 2004.”
The report adds, “Construction sector activity was significantly strengthened during the first quarter, as stimulus from foreign investments intensified, and local building expenditures remained firmly supported by re-insurance claim inflows and mortgage lending for both residential and commercial developments.
“Data collected from banks, insurance companies and the Bahamas Mortgage Corporation revealed that the value of quarterly mortgage disbursements, mainly against residential developments, increased by 14.5% to $86.0 million. More forward looking, the value of local commitments for new construction and repairs more than doubled to $47.1 million, with residential loan approvals accounting for 96.8%, of the total.
“In line with these trends, outstanding mortgages at quarter’s end were 11.5% higher than the previous year, with residential claims elevated by 12.2% to $1,747.0 million and commercial claims, by 3.9% to $164.0 million.”
While the fiscal outlook was improved, expenditure growth outpaced the rise in revenue, resulting in a widening in the budget deficit for the third quarter of FY2004/05. Financial sector trends featured accelerated expansion in domestic credit, which trailed growth in the monetary aggregates, for further improvement in bank liquidity.
On the fiscal front, the report says the estimated deficit for the March quarter of FY2004/2005 widened to $33.2 million from $24.2 million in the year-earlier period.
It says total revenue rose by 0.4% to $254.3 million, trailing the 3.6% expansion in expenditure to $287.5 million.
On the revenue side, the 19.1% strengthening in tax receipts, was nearly offset by the significant shift in the timing of flows, which reduced non-tax revenue by more than half, and the absence of capital revenue as compared to a significant inflow in 2004, according to the Central Bank.
The report says expenditure trends included increases in both current outlays (4.5%) and net lending to the public corporations (28.1%), which masked a reduction in capital outlays (20.0%).
Budgetary financing during the quarter was sourced from an increase in outstanding Treasury bills of $13.1 million, and in advances from the Central Bank of $5.7 million, the report says.
It adds, after principal repayment of $20.4 million, mainly on domestic debt, the direct charge on government declined by 0.1% to $2,099.6 million.
Nevertheless, the bank says, a 0.7% increase in the guaranteed liabilities of the public corporations to $435.2 million, caused the National Debt to rise by 0.1% to $2,534.9 million.
In the context of the Central Bank’s more accommodative policy stance, interest softened broadly, albeit with some widening in the average loan-to-deposit rate spread, the report says.
On the external side, the estimated current account deficit widened, partly on account of an increase in the oil import bill. Meanwhile, a more than two-fold hike in net private foreign investments underpinned a significant boost in the surplus on the capital and financial account, it adds.
