Despite signs of a modest slowdown in global growth, key domestic indicators suggest a continuation of the positive, although mild and narrow, recovery momentum over the review month. Aided by modified promotional campaigns and gains in room revenues, tourism sector output firmed modestly, and construction activity benefitted from both private and public sector investments. Average consumer price inflation showed an upward bias, owing to the pass-through effects of the recent firming in global oil prices, while the fiscal situation was characterised by a smaller overall deficit for the first two months of FY2011/12. In monetary developments, elevated net foreign currency outflows, related in part to commercial banks’ dividend payments, contributed to a contraction in both liquidity and external reserves during the review month.

Based on preliminary data for the eight months to August, tourist arrivals grew by 5.1% to 3.8 million, supported primarily by an 8.4% expansion in sea traffic, which outpaced the 4.0% falloff in the high value-added air segment. By port of entry, visitors to New Providence contracted marginally by 0.4%, as the 3.6% falloff in air arrivals overshadowed the 1.4% uptick in sea passengers. The 6.5% rise in visitors to Grand Bahama to 0.6 million was entirely as a result of an 11.2% increase in the higher volume sea component, given the 19.3% decline in the air segment. For the Family Islands, respective gains in both sea and air traffic, of 16.4% and 3.0%, supported an advance in total arrivals of 14.6% to 1.2 million.

Despite the temporary loss of a significant number of hotel rooms as a result of Hurricane Irene, and the persistent weakness in the stopover segment of the visitor market, preliminary data from a sample of large hotels in New Providence and Paradise Island showed an improvement in hotel revenue, both in September and over the nine-month review period. Indications are that the increase in hotel occupancy offset the contraction in average daily rates, to secure a 10.4% gain in revenue year-on-year in September. In addition, total receipts firmed by 2.0% over the nine-months, due primarily to a 2.2% rise in the average daily room rate to $241.79, as the average room occupancy rate steadied at 66.1%.

Consumer price inflation for the twelve months to September—as measured by the Retail Price Index for The Bahamas—firmed by 1.5 percentage points to 2.8%, amid elevated energy costs. Average price gains accelerated for transportation (8.2%) and housing, utilities & fuels (3.2%)—the most highly weighted component. Additionally, accretions to average costs for education, furnishing, household equipment & maintenance and restaurants & hotels firmed to 3.4%, 3.0% and 2.6%, respectively. Conversely, a slowdown in price increases was registered for alcohol, tobacco & narcotics (1.7%), medical care & health (1.9%) and miscellaneous goods & services (0.4%), while the average cost for clothing & footwear declined by 0.5%.

With regard to electricity costs, the average fuel charge for the month of September was unchanged at 26.00 cents per kilowatt hour over the previous month, but surged by 52.6% on an annual basis. In contrast, the average monthly prices of both gasoline and diesel fell by 1.3% and 2.0% to $5.37 per gallon and $4.98 per gallon, respectively; however, year-on-year, the prices of both fuels increased by 22.6% and 35.3%, respectively.

Preliminary data on Government’s budgetary operations for the first two months of FY2011/12 indicated that the overall deficit narrowed by 13.5% ($8.6 million) to $54.9 million over the corresponding fiscal year. Underpinning this outturn, total revenue improved by 2.8% ($5.1 million) to $188.3 million, supported by a 2.2% gain in tax receipts to $172.7 million. The outturn was due primarily to increases in business & professional fees ($4.6 million) and taxes on services ($1.7 million), which offset the $3.0 million reduction in revenues from international trade taxes. There was also a 9.3% hike in non-tax collections to $15.5 million, mainly attributed to an increase in fines, forfeits and administrative fees. Total spending fell by 1.4% to $243.2 million, as capital outlays declined by 43.7% to $15.9 million, reflecting significant reductions in asset acquisitions and infrastructural outlays, by $8.2 million and $4.1 million, respectively. However, current spending advanced by 4.1% to $222.0 million, and net lending to public corporations rose by 3.6% to $5.3 million.

Download a PDF of the Monthly Economic and Financial Developments for September 2011 here.

This is an excerpt from Central Bank of The Bahamas as it appeared on November 7, 2011. For updates or to read the current version of this post in its entirety, please click here.

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