Central Bank of The Bahamas
Thursday, September 21, 2017
Thursday, September 21, 2017
Indications are that domestic economic conditions remained subdued during the review month, reflecting the ongoing softness in tourism output, while foreign investment projects and hurricane repair activities continued to support construction activity.
Private sector spending also continued to show improvement, as evidenced by rising demand for foreign exchange for the purchase of goods and services from abroad. Given the level of construction activity, the onboarding of staff for Baha Mar, and some public sector recruitments, employment conditions improved over the six months to May 2017, pushing the jobless rate below double digit levels for the first time in almost a decade.
Fiscal developments featured a further expansion in the deficit for the eleven months of FY2016/17, as the growth in aggregate expenditure continued to outpace revenue gains. In the monetary sector, liquidity contracted, as a drawdown in deposits contrasted with growth in credit, while the seasonal increase in foreign currency demand during the summer period, contributed to the falloff in external reserves.
Preliminary estimates from the Ministry of Tourism showed that the sector continued to face challenges from the loss of significant hotel capacity in Grand Bahama. Total visitor arrivals fell by 2.0% to 3.3 million during the first half of 2017, vis-à-vis a 1.8% gain in the comparable period of last year. Underlying this outcome, the high value-added air component declined by 6.0%, a reversal from a 2.8% gain in 2016, while sea passengers decreased marginally by 0.7%, vis-a-vis the prior period’s 1.5% growth.
In terms of the major markets, visitors to Grand Bahama contracted by 25.0%, after 2016’s 5.5% falloff. In particular, constrained by reduced room-capacity, air arrivals fell by 44.3%, after a 15.0% fall in the prior year, when the appreciation of the US Dollar negatively impacted several markets. Similarly, sea visitors decreased by 21.5%, extending the 3.6% loss noted a year ago. In addition, visitors to the Family Islands declined further by 6.7%, compared to a 0.6% softening last year, as the decline in sea passengers deepened to 10.2% from 2.0%; in contrast, the higher-yielding air component strengthened by 15.2%. Led by an accelerated gain in sea arrivals, of 12.8%, the growth in total visitors to New Providence firmed to 6.8% from 5.3%; however, the key air component fell by 6.5%, a turnaround from a 4.0% increase in 2016.
The latest data from the Nassau Airport Development Company Ltd (NAD), also underscored constrained air visitor trends, as July’s departing visitor traffic through the main airport grew by a mere 0.6%, compared to a stronger 1.8% uptick in the same period last year. A breakdown of the components showed that passenger departures to non-U.S. markets decreased by 5.7%, reversing the 2.3% gain in 2016, while the growth in the larger US component slowed to 1.4% from 1.7% last year.
The latest data from the Department of Statistics’ Labour Force Survey for May 2017, showed a 1.7 percentage point decline in the All Bahamas unemployment rate over the prior six-month period and a 2.8 percentage point falloff vis-à-vis March 2016, to 9.9%. This marked the first time the jobless rate has fallen below 10.0% since the 2008 global recession. An analysis by industry showed that the majority of the 7,770 persons hired during the 6-month period were absorbed by the private sector, with the bulk of the new jobs occurring in the community, social and personal services industry, followed closely by hotels and restaurants.
A breakdown by major job centre, showed that the unemployment rate in New Providence softened by 2.5 and 2.8 percentage points over the prior six-month period and on a yearly basis, respectively, to 10.4%. Similar trends were noted in Grand Bahama and Abaco, where the jobless rates fell by 0.9 and 1.3 percentage points to 12.4% and 7.8%, vis-a-vis November 2016; however, both rates were higher by 2.3 percentage points, on a yearly basis.
In a sign of the improvement in job prospects, the number of previously discouraged workers fell by 8.8% over the 6-month period. In addition, the unemployment rate among young persons (15 to 24 years old) narrowed by 1.7 percentage points relative to November 2016; but remained elevated at 24.1%.
Data on the Government’s budgetary operations for the eleven months of FY2016/17, revealed a rise in the deficit by $32.9 million (13.0%), to $285.3 million, due to a $98.2 million (4.9%) expansion in total expenditure to $2,104.5 million, which outpaced the $65.3 million (3.7%) rise in aggregate revenue to $1,819.2 million. Nevertheless, given the cash basis of Government accounting, the recorded fiscal shortfall understates the expected final outcome that includes spending commitments that were still unpaid at the end of the review period.
The growth in total expenditure was driven predominantly by a $93.7 million (56.9%) expansion in capital spending, as hurricane-related outlays led to a $70.2 million (54.7%) increase in capital formation. In addition, asset acquisitions firmed by $23.6 million (64.7%), supported by a five-fold hike in disbursements for financial assets, and an $11.8 million (54.2%) rise in other “miscellaneous” assets. Current expenditure expanded by $42.1 million (2.3%) to $1,846.1 million, on account of a $65.4 million (7.3%) rise in consumption spending, as purchases of goods and services and personal emoluments rose by $35.9 million (12.3%) and by $29.5 million (4.9%), respectively. In contrast, transfer payments decreased by $23.3 million (2.6%), due largely to the $29.3 million (4.4%) decline in subsidies and other transfers, reflecting a reduction in recorded subsidies—mainly to the Ministry of Tourism. Similarly, transfers to both households and abroad decreased by $14.4 million (10.8%), and by $12.1 million (51.1%), respectively; however, interest payments increased by $6.0 million (2.5%).
Revenue gains were anchored by the $59.2 million (3.7%) expansion in tax receipts. Specifically, other “miscellaneous” taxes strengthened by $33.3 million (9.7%), owing largely to a $16.9 million (16.7%) rise in property taxes and a $9.0 million (13.7%) gain in stamp taxes related to financial transactions. Similarly, international trade taxes rose by $16.2 million (3.4%), reflecting growth in excise and import taxes by $13.5 million (6.2%) and by $7.9 million (3.1%), respectively. Also noteworthy, buoyed by gains in payments by banks & trust companies, as well as other private firms, business & professional fees expanded by $5.2 million (3.7%), while other ‘unclassified’ collections grew from just under $1.0 million to $8.6 million. In a slight offset, value added tax (VAT) receipts decreased by $4.3 million (0.7%); and selective taxes on other services contracted by $1.9 million (7.1%), as gaming taxes declined by $2.6 million (9.7%). Non-tax revenue firmed by $6.2 million (3.6%)—occasioned by a $3.0 million (8.7%) rise in income from other sources—while fines, forfeits & administration fees grew by $3.7 million (2.8%).
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