NASSAU, Bahamas, CMC – The Central Bank of The Bahamas (CBB) Wednesday said the domestic economy maintained its recovery momentum during the fourth quarter of last year from the adverse effects of the coronavirus (COVID-19) pandemic.
In the Quarterly Economic Review providing an examination of the domestic economy’s performance, as well as sectoral developments, principally during the period October to December, the CBB said tourism output continued to record robust growth.
It said healthy gains in the high value-added air segment and the rebound in sea traffic, reflective of the relaxed pandemic restrictions and pent-up demand for travel in the key source markets, undergirded such growth.
“In addition, foreign investment projects, and to a lesser extent post-hurricane reconstruction work, continued to provide positive impulses to the construction sector. In price developments, domestic inflation remained elevated over the review quarter, reflecting the pass-through effects of higher global oil prices and increased costs for imported goods,” the CBB said.
It said preliminary estimates revealed that during the second quarter of the financial year 2022/23, the Government’s overall deficit widened relative to the comparative quarter of the financial year 2021/22.
“Underlying this outturn, spending recovery paced faster than the value-added tax (VAT)led growth in revenue, buoyed by improving economic conditions. Budgetary financing was mainly obtained from internal sources and a drawdown in International Monetary Fund (IMF) Special Drawing Rights (SDRs).”
The CBB said that monetary developments featured a contraction in bank liquidity, as the domestic credit expansion contrasted with the deposit base reduction. Correspondingly, external reserves declined, attributed to the seasonal increase in demand for foreign currency and the conversion of the IMF SDR allocations.
“Further, banks’ credit quality indicators improved during the review quarter, underpinned by the sustained strengthening in the domestic economy and ongoing loan write-offs. In addition, the latest data for the third quarter indicated a rise in banks’ overall net income, led by a decrease in bad debt provisioning.”
In the external sector, the CBB said the estimated current account deficit narrowed during the review quarter due to a marked increase in the services account surplus, bolstered by ongoing gains in tourism earnings.
In contrast, the financial account balance switched to a net outflow, vis-à-vis an inflow in 2021, owing primarily to a reversal in other investment transactions to a flow from an influx a year earlier and a surge in portfolio investment outflows associated with residents’ purchases of Government’s external bonds, the CBB said.
The CBB said preliminary evidence suggests that tourism output continued to strengthen during the final quarter of 2022, benefitting from the easing of pandemic related-restrictions in the primary source markets and pent-up demand.
It said these contributed to healthy seasonal gains in the high-valued air segment and a notable rebound in the dominant sea component.
Data from the Ministry of Tourism showed that overall visitor arrivals during the three months to December expanded to 2.2 million, surpassing the 1.2 million increase in visitors in 2021.
Underlying this outturn, sea passengers more than doubled to 1.8 million, from 0.9 million in the comparable period last year. In addition, air traffic grew to 0.4 million, exceeding the 0.3 million visitors registered in the prior year.
Construction sector activity during the fourth quarter remained supported by ongoing, varied-scale foreign investment projects. However, bank-financed domestic private-sector activity remained constrained.
“In domestic financing developments, total mortgage disbursements for new construction and repairs—as reported by banks, insurance companies, and the Bahamas Mortgage Corporation—rose by 21.4 percent (US$4.7 million) to US$26.7 million.”
Provisional data on the Government’s budgetary operations for the second quarter of the financial year 2022/23 showed that the overall deficit widened by US$108.8 million (75.1 percent) to US$253.7 million, in comparison to the same period of the financial year 2021/22.
“Underpinning this outturn, spending recovery paced faster than the VAT-led pickup in revenue, bolstered by improving economic conditions. Specifically, aggregate expenditure rose by US$175.5 million (25.7 percent) to US$857.7 million, while total revenue grew by US$66.7 million (12.4 percent) to $604 million.”
The CBB said tax revenue, which constituted 86.5 percent of total receipts, increased by US$76.5 million or 17.2 percent) to US$522.2 million.
The central bank said non-tax receipts, which represented 13.4 percent of total revenue, contracted by US$10.7 million or 11.7 percent) to US$80.7 million.
It said contributing was a US$16 million reduction in property income to US$17.2 million, owing mainly to a considerable timing-related falloff in revenue from interest and dividends.
The CBB said the growth in total expenditure was led by a US$152.4 million expansion in current charges to US$795.3 million, while capital outlays grew by US$23 million to US$62.4 million.
“By economic classification, the increase in current expenditure was led by a US$37.2 million (32 percent expansion in outlays for the use of goods and services, to US$153.4 million,” the CBB added.
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