Central Bank of The Bahamas
Monday, September 5, 2016
Monday, September 5, 2016
Indications are that domestic economic conditions remained mildly positive over the review period, characterised by continued foreign investment-led construction activity, while the impulses from the tourism sector were modest. In prices developments, the inflation rate narrowed during the 12 months to June, reflecting the sustained impact of low global oil prices.
Meanwhile, liquidity in the banking system firmed, buoyed by the Government’s financing activities, while the lowered import pressures, also from abated fuel prices, contributed to a modest gain in external reserves.
Indications are that tourism output trends softened during the first half of 2016, in comparison to the previous year. The latest official data from the Ministry of Tourism suggests that the increase in the high value-added stopover visitor segment (air arrivals) slowed to 2.7% from last year’s 5.0% gain, for a total of 0.8 million tourists. The overall visitor count firmed by 1.7% to 3.3 million, a reversal from a 1.1% decline in the prior year, as the dominant sea component expanded by 1.5% to 2.5 million, vis-à-vis 2015’s 2.8% contraction.
However, earnings metrics were tempered, as data through April showed that room revenues at large resort properties in the capital trended lower than in 2015. In addition, commercial banks’ foreign currency transactions through July—which include inflows from tourism and investment related activities—registered a modest decline in such gross receipts relative to the same period last year.
That said, the comparative outlook is improving for the remainder of 2016, given the stimulus from the restoration of some room capacity on New Providence and the pending boost to construction output from the resumption of work on the Baha Mar project.
Largely reflecting the pass-through effect of the decline in global oil prices, domestic inflation—as measured by the All Bahamas Retail Price Index—narrowed by 83 basis points to 0.58% during the twelve months to June 2016. This outturn was largely attributed to a 2.7% reduction in the average cost for housing, water, gas electricity and “other” fuels—which accounts for a third of the index—vis-a-vis a marginal 0.2% gain a year ago.
In addition, transportation costs fell by 5.4%, extending the year earlier decline of 1.9%, while gains in average prices lessened for furnishing, household equipment & routine household maintenance (by 1.2 percentage points to 3.4%), alcohol beverages, tobacco & narcotics (by 60 basis points to 5.2%), clothing and footwear (by 40 basis points to 2.8%), and recreation & culture (by 19 basis points to 6.8%). In contrast, healthcare costs increased by an additional 12.0%, after a 7.0% advance in 2015, while muted gains in inflation rates of less than 2.0 percentage points were registered for the remaining components.
Domestic energy price developments were mixed over the review period, as gasoline costs softened by 0.2%, month-on-month, to $4.11 per gallon in July, and by 15.8% in comparison to the previous year. In contrast, the Bahamas Electricity Corporation’s (BEC) fuel charge rose on a monthly basis by 5.2% to 9.85 cents per kilowatt hour (kWh), but was 37.4% lower on a year-on-year basis.