NASSAU, Bahamas– The Central Bank of the Bahamas (CBB), says the domestic economy recovered further during April amid ongoing international adjustments to the coronavirus (COVID-19) pandemic.
Tourism output continued to strengthen, undergirded by improvements in the high value-added air segment and a notable rise in sea traffic as vaccination efforts progressed and COVID-19 restrictions eased in some primary source markets.
The CBB said monetary developments for April revealed an expansion in bank liquidity, as the growth in the deposit base contrasted with the decline in domestic credit. Further, external reserves increased during the review month, supported by net foreign currency inflows from actual sector activities.
During April, the growth in the deposit base contrasted with the decline in domestic credit. In particular, excess reserves – a narrow measure of liquidity- increased by US$125.8 million to US$1,932.0 million, exceeding the US$74.6 million build-ups in the previous year.
“Similarly, excess liquid assets -the broad measure of liquidity -grew by US$85 million, albeit lower than the prior year’s gain of $90.6 million.”
The CBB said external reserves expanded by US$92.6 million to US$3,066.6 million in April, outpacing last year’s US$3.1 million upticks, buoyed by net foreign currency inflows through the private sector.
It said underlying this development, the Central Bank’s net foreign currency purchases from commercial banks advanced to US$131.1 million, from US$45.3 million in 2021. Further, commercial banks’ net intake from their clients strengthened to US$118.3 million from US$44.9 million in the prior year. Meanwhile, the bank’s net sales to the public sector moderated to US$36.3 million from US$42.4 million a year earlier.
In its latest “Monthly Economic and Financial Developments (MEFD) for April, the CBB said the domestic economy is expected to sustain its recovery trajectory in 2022, undergirded by an ongoing strengthening in tourism sector output.
“However, the sector’s downside risk exposures persist as new strains of the COVID-19 virus emerge, potentially hindering progress made on the international health front and dampening the travel industry prospects. In addition, elevated international fuel costs could weaken the travel sector’s competitiveness. At the same time, the major central banks’ counter-inflation policies could erode the travel spending means of consumers in key source markets.
Nonetheless, new and ongoing foreign investment-led projects, along with post-hurricane reconstruction works, are projected to provide continued stimulus to the construction sector,” the CBB said.
The unemployment rate is anticipated to remain above pre-pandemic levels in the labor market. Any job gains are concentrated mainly in the construction sector and the rehiring of tourism sector employees.
“In terms of prices, the domestic inflation rate is expected to be elevated in the near-term, underpinned by the increase in international oil prices, higher costs for other imported goods, and supply chain shortages related to the ongoing geopolitical tensions in Eastern Europe.”
The CBB said that the government’s net financing gap is projected to remain elevated in the fiscal sector, although trending downwards. In particular, some expenditure priorities are expected to remain framed by the required health and social welfare outlays related to COVID-19 and investments still associated with the restoration of crucial infrastructure following the significant hurricane in 2019.
“Meanwhile, the recovery in revenue is expected to be significantly linked to tourism-led improving trends in taxable economic activity. Financing the estimated budgetary gap is expected to require domestic and external borrowings, but with increased sustainability of domestic sources.”
The CBB said monetary sector developments should continue to feature high levels of banking sector liquidity as commercial banks maintain their conservative lending posture. It spoke. Further, external reserves are forecasted to remain buoyant over the year, supported by anticipated foreign currency inflows from tourism and other net private sector receipts, thus ending 2022 well above international benchmarks.
“Consequently, external balances should remain more than adequate to sustain the Bahamian dollar currency peg,” the CBB said, noting that based on the prevailing outlook, the Central Bank will sustain its accommodative policy stance for private sector credit and pursue policies that ensure an excellent outturn for external reserves, and mitigate financial sector disruptions.
Further, the CBB will continue to monitor developments within the foreign exchange market and, if necessary, adopt appropriate measures to support a favorable outcome for the foreign reserves.
In its report, the CBB said as significant source markets further adjusted to COVID-19 pandemic conditions, initial data indicated that monthly tourism output maintained its growth momentum in April.
Official data provided by the Ministry of Tourism (MOT) revealed that total visitor arrivals by first port of entry were substantially resumed at 623,102 in March, from just 62,765 in 2021.
It said contributing to this development, air traffic yielded 147,616, compared to 56,371 in the prior year, regaining 73.2 percent of the volumes registered in 2019. In addition, sea traffic was reinstated at 475,486 from a mere 6,394 visitors in the previous year, when cruise sailings remained suspended.
The CBB said disaggregated by significant markets, total arrivals to New Providence amounted to 304,506 in March, from 39,093 in 2021. Under this outturn, the air and sea segments rose to 112,719 and 191,787 visitors.
Similarly, foreign arrivals to Grand Bahama advanced to 27,932 compared with 1,973 in the preceding year, as air and sea arrivals measured 3,458 and 24,474, respectively. Further, traffic to the Family Islands resumed at 290,664, compared to just 21,699 in the prior year, attributed to gains in the air and sea components, to 31,439 and 259,225, respectively.
The Nassau Airport Development Company Limited (NAD) data for April showed that total departures increased to 125,061 from 47,332 in 2021. Specifically, United States departures amounted to 106,773, up from 45,995 a year earlier, while non-U.S. departures advanced to 18,288 from 1,337 in the preceding year.
The CBB said that in the short-term vacation rental market, data provided by Air DNA showed ongoing gains during April.
“Specifically, total room nights sold firmed to 145,137 from 114,718 in the corresponding 2021 period. The average daily room rate (ADR) for comparable hotel listings moved higher by 13.8 percent to US$196.22 and for entire place listings by 6.9 percent to US$514.52.
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