Indications are that domestic economic conditions maintained a positive trend during the review month, supported by modest gains in tourism output and ongoing foreign and public sector investment projects. However, the mild momentum of the recovery continued to limit job gains and rising energy costs exerted some upward pressure on domestic price levels. The fiscal situation registered an improvement in the overall deficit for the first half of FY2011/12, reflecting higher revenue collections and relatively flat spending. In the monetary sector, gains in bank liquidity were considerably below the year earlier levels and external reserves contracted, following on last year’s outcome—which was boosted by extraordinary foreign currency inflows.

Initial reports suggest an improved tourism performance over the review month, as the ongoing expansion in the United States economy—the major market for visitors—and travel incentive programmes, braced ongoing gains in the key group segment of the market. Preliminary data from a sample of hotels in New Providence and Paradise Island showed total room revenue rising by 8.8% in January over the previous year, owing to a 5.1 percentage point rise in the average occupancy rate to 59.4%, which overshadowed a 0.6% decrease in the average daily room rate to $232.51. Tourism-related foreign investment activity also continued at a brisk pace, led by two major projects in New Providence.

In the absence of a broad-based recovery, labour market conditions remained challenging. Recent data released by the Department of Statistics revealed an increase in the unemployment rate in The Bahamas, to 15.9% for the period ending November 2011 from 13.7% in May. The deterioration in the jobless rate, which contrasted with the previous downward trajectory, was mainly attributed to a shift in a significant number of persons who were either described as self-employed or engaged in the informal sector, to the unemployed category and, to some extent, seasonal factors, such as the entrance of recent high school and university graduates into the labour force.

Reflecting the upward trend in international oil prices, inflation for 2011—as measured by the Retail Price Index for The Bahamas—firmed by 1.9 percentage points to 3.2%. For 2011, transportation costs, which are directly impacted by fuel prices, rose strongly by 9.4%, outpacing the 4.0% advance in the previous period, while accelerated average price increases were also evident for furnishing, household equipment & maintenance (4.3%), restaurant & hotels (3.1%), education (3.1%), housing, utilities & fuels (3.1%)—the most heavily weighted component of the index—and recreation & culture (1.6%). After registering respective declines of 1.2% and 0.4% a year earlier, the average costs for food & non-alcoholic beverages turned upwards by 1.9% and for communication, by 1.3%. The other categories either recorded a slowdown in price gains or a decline in average costs over the period.

Recent indicators suggest a continued, although moderated, uptrend in domestic fuel prices. For the month of January, the price of gasoline rose by 0.6% to $5.08 per gallon, while the average cost of diesel stabilised at $5.14 per gallon. However, buoyed by higher global fuel costs, the average price per gallon of gasoline and diesel firmed by 9.0% and 23.3%, respectively, year-on-year. Further, The Bahamas Electricity Corporation’s fuel charge decreased by 1.4% to 25.93 cents per kilowatt hour (kWh) over the review month, but rose by 37.1% over January, 2011.

Data on Government’s budgetary operations for the first half of FY2011/12, showed an improvement in the overall deficit by $50.6 million (23.6%) to $163.6 million, relative to the same period in FY2010/11. Gains in total revenue, of $50.3 million (8.7%) to $628.9 million, were boosted mainly by capital receipts from investment-related securities, which caused total non-tax receipts to surge by 18.5% to $78.8 million. In addition, proceeds from the sale of Government property led to a hike in capital revenue to $17.7 million. Under the tax revenue component, higher collections were also registered for excise taxes ($22.0 million), taxes on international trade ($8.0 million) and business & professional fees ($7.3 million). Aggregate expenditure decreased slightly by $0.2 million (0.03%) to $792.5 million, as the repayment of outstanding debts by a public corporation led to a $42.1 million reduction in net lending. However, current outlays grew by $25.2 million (3.7%) to $712.2 million, mainly on account of a 36.6% rise in goods & services, linked to the procurement of various contractual services, alongside a 3.0% increase in wages & salaries and a decline in transfer payments by 4.2%, due to lower outlays for interest and subsidies. Reflecting ongoing infrastructure projects, capital expenditures grew by $16.7 million (20.0%) to $99.9 million.

Download The Central Bank of the Bahamas’ Monthly Economic and Financial Developments report here.