NASSAU, Bahamas, CMC – The Governor of the Central Bank of The Bahamas (CBB), John Rolle, says based on preliminary data, the Bahamian economy expanded at a healthy but moderated pace in 2024, led by the performance in tourism and continued foreign investments also attracted into the sector.
Central Bank Governor John Rolle, speaking at the release of Monthly Economic and Financial Developments (MEFD) for December 2024, said the economy is expected to continue to grow in 2025, but possibly slower than the rates achieved in 2024, as the country gets closer to its medium-term potential, which is still below two percent.
He said that for tourism, the cruise sector is likely to drive further record gains in visitor arrivals, which will boost the upside potential for earnings. However, the extent of growth in stopover activity will continue to influence the overall trends in the industry’s earnings significantly.
“That said, sustained investments in stopover and cruise capacity should set the stage for more permanent jobs when these investments transition into operations mode.
“It is the economy’s expansionary prospects, declining credit delinquency, and the more entrenched support of the credit bureau that favor continued strengthening in lending to the private sector in 2025.”
Rolle said that the Central Bank supports this outlook from a monetary policy perspective, which corresponds to a potential reduction in external reserves in an otherwise healthy foreign exchange environment.
“This would also target some reduction in bank liquidity. In line with broader objectives to remove liquidity from the system, the Central Bank will also accommodate faster repatriation of excess capital or dividends from the banking system, keeping with medium-term plans paused during the pandemic.”
Rolle said that to support the lending environment even further, the Central Bank will continue to assess how to ease access to credit for productive business activities, including instances where exchange control still has an impact.
“In addition, as far as the moveable collateral assets registry is concerned, concentrated efforts will be made over the first half of 2025 to complete the implementation of the register, in consultation with lending institutions and cooperation with the Attorney General’s Office.”
However, the Central Bank Governor acknowledged that downside risks always justify a balance of some prudence in monetary policy.
He said uncertainties persist around unrest in the Middle East and the war in Ukraine.
“In addition, the escalation of global trade tensions could lead to higher inflation and stall further interest rate reductions in the major economies.
“Any consequential slowdown in the North American economies, or negative impacts on US households’ purchasing power, would also limit near-term gains in tourism, whether in terms of growth in arrivals or the industry’s ability to preserve pricing gains in accommodations.”
Rolle said that the Central Bank will continue to monitor trends and pursue the appropriate policies to safeguard financial stability and the value of the Bahamian dollar.
The CBB Governor said that in 2024, employment gains continued to register, and developments supported the government’s deficit reduction efforts.
Rolle said The Bahamas benefited from additional moderation in inflation, as average consumer price increases slowed at the international level, and domestic energy sector adjustments caught up with the external savings from reduced oil prices.
In the monetary sector, domestic credit growth strengthened significantly, lending conditions improved, and average loan delinquency rates further subsided.
“Nevertheless, as activity still subsisted below the levels that the Central Bank anticipated, the banking system’s liquidity further expanded, and the external reserves grew modestly,” Rolle said.
He said that 2024 the economy’s growth rate is projected to have slowed, below the estimated 2.6 percent recorded in 2023.
“There was further moderation in stopover tourism activity, which, although fully recovered from the pandemic, faced a constrained supply of hotel rooms. Based on available data, compared to the same period of 2023, air arrivals, mostly stopover inflows, were approximately unchanged over the first 11 months of the year.”
However, Rolle said that over the same months in 2023, there was still a strong recovery element in growth of nearly 20 percent. In addition to capacity, market demand is also estimated to have been held back over the second half of 2024 due to increased disruptions during the hurricane season and consumer uncertainty leading up to the US presidential elections in November.
He said that looking ahead to 2025, accommodations constraints could continue to limit earnings gains. Moreover, the average nightly room rates are also expected to experience more subdued gains, following healthy average appreciation in the immediate years after the pandemic.
Rolle said the vacation rental market has supplemented stopover capacity and earnings growth. The rental inventory expanded by just over five percent during the 202
He said the average occupancy rates on listings decreased slightly, and the average nightly room rate rose at a much more tempered pace, as opposed to healthy appreciation both during and in the immediate years since the pandemic.
The BB Governor said the cruise segment was unconstrained, with robust growth in 2024. It also continued to attract significant foreign direct investments into private destination facilities, particularly impacting Family Island economies.
“While the per visitor spending from the cruise segment is multiples lower than for onshore visitors, the retained local content per dollar is expected to be higher than for stopover visitors. This is because it is more concentrated in cultural and recreational activities.
“Also, such expenditures significantly benefit small businesses and self-employed persons. This underscores the potential for a further boost in returns from the sector by expanding the menu of onshore activities in which these visitors can engage.”
Rolle said that tourism and investment trends continued to positively impact employment during 2024. However, given the revised methodology adopted by the Bahamas National Statistics Institute (BNSI), the available data was not directly comparable to the years before 2024.
He said one noteworthy shift in the data was the improved labor force participation rate for males, which now better tracks how the economy benefits males.
“In the meantime, as interest rates have fallen in the US and other major industrial countries, the funding environment for foreign direct investments also improved, making it easier for The Bahamas to sustain current inflows.
“As a caveat though, the near-term pace of interest rate reduction is expected to pause until there is a better understanding of any impact to inflation from the new trade policies pursued by the United States.”
The Central Bank Governor said that the foreign exchange market trends also support the assessment that, post-pandemic recovery, the economy is expanding slower in earnings and business and consumer spending.
He said that at commercial banks, total purchases of foreign exchange from the private sector grew by just 2.3 percent to US$7.3 billion in 2024, being only incrementally varied for the second consecutive year.
The growth rate in foreign currency sales to the private sector, which funds imports and payments abroad on investments and other activities, increased marginally by 1.5 percent, varying slightly for a second year, to US$7.2 billion. Rolle said that since inflows still dominated, commercial banks had a more significant net purchase of foreign exchange from the public and were, therefore, able to make a more extensive net sale of foreign exchange to the Central Bank.
“This development, and a reversal in the Central Bank transactions with the public sector, to a net purchase of foreign exchange rather than the notable net sale of foreign exchange in 2023, contributed to a net boost to the external reserves, by approximately US$270 million to US$2.62 billion in 2024.
“A third factor that helped to grow the foreign reserves in 2024, adding to almost one-fourth of the gains, was stronger earnings on the investment portfolio of the Central Bank. As of the beginning of February 2025, the reserves were estimated at US$2.63 billion, just ahead of the rebound, which should occur during the busy portion of the tourist season.”
Rolle said that external reserves are projected to contract overall in 2025 because domestic banks are expected to grow credit to the private sector at a more vigorous pace than in 2024. The system should continue to sustain a larger net share of the government’s borrowing needs in local currency instead of foreign currency.
He said that last year, commercial bank credit growth was significantly accelerated. Lending to the private sector rose by almost US$350 million, or about six percent, compared to about US$60 million, or just one percent, in 2023.
“This pickup was across consumer credit and business lending, including a rebound in mortgage financing. In the meantime, the average non-performing loans rate, or the share of loans three months or more behind in payments, was further reduced to 5.5 percent by the end of 2024, down from 6.7 percent in 2023. This improves the climate for future lending,” Rolle said.
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