The BAHAMAS-Central Bank says growth in the domestic economy continued in July.

NASSAU, Bahamas, CMC – The Central Bank of Bahamas (CBB) says preliminary indications are that during July, the growth trajectory of the domestic economy persisted, although at a moderated pace, with indicators reverting to trend, as the recovery from the COVID-19 pandemic neared completion.

In its Monthly Economic and Financial Developments July 2023, released on Monday, the central bank said that the domestic economy is projected to sustain its positive growth trajectory in 2023, buoyed by ongoing gains in tourism sector output.

However, as indicators return to pre-pandemic levels, the pace of expansion is expected to moderate. Further, downside risks to the sector persist, related mainly to exogenous factors, such as elevated global prices, which could disrupt travel sector activity.

In addition, major central banks’ counter-inflation policies could weaken the travel spending capacity of critical source market consumers.

“Nonetheless, new and ongoing foreign investment-led projects are anticipated to support the construction sector and economic growth. In terms of the labor market, the employment rate is expected to continue to improve, associated with job gains concentrated largely in the construction and tourism sectors,” the CBB said.

It said in terms of prices, inflation is projected to remain high in the near term, although decreasing over the medium to long term, with a lag to moderating price trends in the major trading markets and delayed fuel cost pass-through in domestic energy costs.

“Nevertheless, uncertainty in international oil prices and supply chain shortages related to geopolitical tensions in Eastern Europe are upside risks to inflation. As conditions become more favorable for more consolidation, the government’s net financing gap is anticipated to sustain its downward trend on the fiscal front.

“The recovery in revenue is expected to be significantly connected to tourism-led improvements in taxable economic activities. Further, the estimated budgetary gap is projected to require a blend of domestic and external borrowings, but with a higher proportion of the total funding from domestic sources.”

Regarding monetary sector developments, the CBB said banking sector liquidity is expected to remain elevated due to commercial banks maintaining their conservative lending posture. In addition, external reserve balances are forecasted to remain buoyant in 2023, remaining above international benchmarks, supported by anticipated foreign currency inflows from tourism and other net private sector receipts. External balances should remain adequate to sustain the Bahamian dollar currency peg.

The CBB said the tourism sector output continued to record strong growth, bolstered by robust gains in the high value-added air component and the sea segment, attributed to the ongoing demand for travel in key source markets.

Tourism Monthly data revealed that tourism maintained a healthy growth momentum in July, amid solid gains in both the high-value air traffic and the sea segment, because of the ongoing demand for travel in the primary source markets.

The most recent data provided by the Nassau Airport Development Company Limited (NAD) indicated that total departures in July, net of domestic passengers, rose by 15.7 percent to 167,052, relative to the comparative period in 2022.

Specifically, U.S. departures increased by 16.1 percent to 149,967, while non-U.S. leaves grew by 12.5 percent to 17,085 compared to the previous year.

“On a year-to-date basis, total outbound traffic expanded by 28.1 percent to approximately one million passengers. In particular, U.S. departures increased by 28 percent to almost 0.9 million visitors vis-à-vis the same period in 2022. Likewise, non-US departures rose by 28.8 percent to just over 0.1 million visitors, compared to the prior year.”

The CBB said positive trends were mirrored in the short-term vacation rental market. The latest data provided by AirDNA showed that in July, the total number of room nights sold increased to 201,530 from 170,904 in the corresponding 2022 period.

Reflecting this outturn, the occupancy rates for entire place and hotel comparable listings rose to 67 percent and 60.2 percent, respectively, relative to 61.8 percent and 55 percent in the prior year.

Further, price indicators revealed that year-over-year, the average daily room rate (ADR) for entire place listings increased by 4.7 percent to US$563.52, and for hotel comparable listings, by 1.9 percent to US$199.58.

During July, monetary developments featured moderated gains in bank liquidity, with growth in the deposit base outpacing the rise in domestic credit. Specifically, excess liquid assets, a broad measure of liquidity, expanded by US$114.5 million to US$3,020.4 million, albeit lower than the 244.4 million accumulation a year earlier.

Likewise, excess reserves, the narrow measure of liquidity, rose by US$43.4 million to US$2,043.9 million, a slowdown from a US$261 million build-up in 2022.

The CBB said that external reserves grew by US$39.8 million to US$2,737.3 million during the review month, although a moderation from the $84.2 million expansion in the previous year’s comparable period.

It said contributing to this outturn, the Central Bank’s net purchase from commercial banks widened to US$84.7 million from $33.9 million in the prior year.

Meanwhile, commercial banks’ net intake from their customers strengthened to $102.9 million, from the US$23.1 million gain last year. In contrast, the Central Bank’s transactions with the public sector reversed to a net sale of US$45.4 million from a net purchase of US$54.8 million in 2022.