BAHAMAS-Domestic economy sustained economic growth in May.

NASSAU, Bahamas, CMC – The Central Bank of the Bahamas (CBB) says provisional data suggest that the domestic economy sustained its growth momentum during May, although at a more moderate pace, as economic indicators continued to move closer to their expected medium-term potential.

It said that tourism output maintained its healthy growth, undergirded by robust gains in both the high value-added air segment and the sea component, as the demand for travel in crucial source markets persisted.

“Further, labor market conditions showed improvement over the last quarter of 2023, reflective of the ongoing strengthening in economic activity,” the CBB said in its Monthly Economic and Financial Developments (MEFD) Report May 2024, released here.

It said monetary sector developments for May featured a reduction in bank liquidity, as the increase in domestic credit outpaced the rise in the deposit base. Similarly, external reserves decreased, primarily due to net foreign currency outflows through the public sector, offsetting net private sector inflows.

The CBB said that tourism data suggest that the sector continued to record healthy growth. This growth is attributed to the ongoing gains in both the high-value-added air segment and sea traffic, reflecting the sustained demand for travel in key source markets.

It said preliminary data from the Nassau Airport Development Company Limited (NAD) revealed that total departures grew by 4.2 percent to 137,866 in May, relative to the same period in 2023.

Notably, international departures increased by 12.9 percent to 19,525. Likewise, U.S. departures rose by 2.8 percent to 118,341.

The CBB said that total outbound air traffic advanced 7.2 percent to 0.7 million on a year-to-date basis. Specifically, U.S. departures increased by 7.8 percent to 0.6 million, while international departures grew by 3.9 percent to 0.1 million, vis-à-vis the preceding year.

The short-term vacation rental market incorporated these positive trends, with the CBB, saying that the latest data provided by AirDNA revealed that total room nights sold increased by 12 percent to 54,140 in May, as compared to the previous year.

“In line with this development, the occupancy rate for hotel comparable listings firmed to 46.8 percent from 45.2 percent. Conversely, the occupancy rate for entire place listings declined to 48.3 percent from 48.7 percent in 2023. Meanwhile, price indicators showed that the average daily room rate (ADR) for both hotels comparabUS$681.43, respectively,” the CBB said.

The government’s budget communication for the financial year 2024/2025, entitled “Changing the Status Quo, Changing Lives,” was presented in Parliament on May 29. The fiscal package conveyed the overarching objectives of encouraging economic activity, offsetting rising living costs, and supporting national security interests.

The CBB said in the the 2024/25 budget, the government signaled plans to encourage economic growth through targeted revenue collection measures to counterbalance new tax relief measures.

In this regard, the government projected a revenue intake of US$3.5 billion in the financial year 2024/25, relative to the revised estimate of US$3.3 billion for the financial year 2023/24.

Regarding revenue measures, no general increase in taxes or fees is scheduled for the financial year 2024/25, aligning with the government’s goal of counteracting rising living costs.

The CBB said that although fees for government services are set to be adjusted according to changes in the cost of providing the service, the government mainly expects to boost revenue by increasing yields from foreign direct investment and real estate transactions. The government also aims to generate income by stimulating overall economic activity, mainly through small business development.

The government introduced several custom duty reductions for various items to offset the increased cost of living. The government offered duty concessions to support small businesses for items utilized in multiple industries, such as fishing, manufacturing, and the creative arts.

Measures to increase tax proceeds largely targeted collection efficiency and enforcement. Although the budget proposed no new taxes, adjustments were scheduled for fees on government services, where the cost of providing that service had risen.

In addition, heightened efforts were concentrated on increasing revenue from foreign direct investment and real estate transactions, the CBB said as it reviewed the government’s fiscal package.

It said that based on the current economic outlook, the government projects that the fiscal deficit for the financial year 2024/25 will amount to US$69.8 million, representing 0.5 percent of gross domestic product (GDP)

“This outturn would further consolidate the revised forecasted deficit of US$131.1 million (0.9 percent of GDP) for the financial year 2023/24.”

The CBB said, based on quarterly estimates compiled by the Bahamas National Statistical Institute, labor market conditions showed further improvement, with All Bahamas unemployment measured at 9.9 percent in the fourth quarter of 2023.

The number of employed persons increased to 214,170 from 212,285 in September 2023. “Given the new methodology, direct comparisons with earlier data were impossible. However, by major markets, the end-2023 jobless rate in New Providence was 9.5 percent; Grand Bahama averaged 10.4 percent, and Abaco, eight percent at the end-2023,” the CBB added.