NASSAU, Bahamas, CMC – The Central Bank of the Bahamas (CBB) says preliminary indications are that during January, the domestic economy sustained its growth momentum, although at a more tempered pace, with economic indicators returning closer to their expected medium-term potential.
In its outlook for the domestic economy, the CBB said that as the economy converges closer to its medium-term growth potential, the domestic economy is anticipated to expand at a moderated pace in 2024, supported by ongoing gains in the tourism industry and other areas of the real sector.
“However, the downside risks to tourism persist, related mainly to exogenous factors, such as geopolitical tensions and heightened global oil prices, which could disrupt travel sector activity.
“Moreover, the resumption of major central banks’ counter-inflation policies could curtail the travel spending capacity of key source market consumers. Nevertheless, new and ongoing foreign investment-led projects are expected to provide stimuli to the construction sector and, by extension, contribute to economic growth,” the CBB said in its “Monthly Economic and Financial Developments (MEFD) January 2024” report released on Monday.
In the labor market, employment conditions are forecasted to improve, with additional job gains concentrated largely in the construction and tourism sectors. In price developments, inflation is projected to continue trending downward as improvements in global oil prices persist.
“Nonetheless, upside risks to inflation revolve around uncertainty in global oil prices and supply chain shortages, which are related to geopolitical tensions in Eastern Europe and the Middle East.”
On the fiscal front, the Government’s net financing gap is anticipated to trend further downward. The expected revenue recovery remains significantly linked to tourism-led improving trends in taxable economic activities.
“As a consequence, the estimated budgetary gap is anticipated to require a combination of domestic and external borrowings, but with an increased proportion of the total funding from domestic sources. “
In its report examining the country’s performance in January, the CBB said tourism output continued to register healthy growth, bolstered by gains in both the high-value-added air segment and the sea component. Demand for travel in crucial source markets persisted amid aggressive destination marketing.
It said the average consumer price inflation, as measured by changes in the average Retail Price Index (RPI) for The Bahamas, moderated in 2023, as the rise in international oil prices slowed, relative to the same period last year.
“An expansion in banking sector liquidity marked monetary trends for January because of a buildup in the deposit base, which contrasted with the reduction in domestic credit. Similarly, external reserves grew, largely attributed to the Government’s external borrowing activities,” the CBB said.
It said tourism metrics for January suggest that the sector maintained its growth trajectory, undergirded by ongoing gains in both the high-value-added air segment and sea passengers, as the demand for travel in crucial source markets persisted.
Official data from the Ministry of Tourism showed that visitor arrivals rose to one million in December 2023 from 0.9 million in the comparative period of 2022.
“Specifically, the dominant sea segment increased to 0.85 million visitors from 0.75 million passengers in the previous year. Further, the value-added air component grew to 0.16 million visitors, the same magnitude as the prior year,” the CBB added.
It said annually, total arrivals strengthened to a historic 9.6 million visitors in 2023, vis-à-vis seven million in the 2022 period.
Contributing to this outcome, air arrivals advanced to 1.7 million passengers, from 1.5 million in the prior year, extending the 65.8 percent gain in the previous year, reflective of increases in all major markets. Likewise, sea arrivals accelerated to 7.9 million from 5.5 million visitors in the preceding year.
Data provided by AirDNA on the short-term vacation rental market showed that in January, total room nights sold declined by 6.9 percent to 137,479 from a year earlier. Correspondingly, the occupancy rates for both entire place and hotel comparable listings decreased to 47.8 and 47.9 percent, respectively, compared to 56.6 and 55.7 percent in the prior year.
Further, price indicators showed that year-over-year, the average daily room rate (ADR) for entire place listings decreased by 5.3 percent to US$496.86. In contrast, the ADR for hotel comparable listings increased by 1.1 percent to US$188.59, the CBB added.
It said that the average domestic consumer price inflation, as measured by the All Bahamas Retail Price Index, slowed to 3.1 percent in 2023 from 5.6 percent in 2022 as the rise in international oil prices moderated compared with the previous year.
The CBB said monetary trends during January featured an expansion in banking sector liquidity, as the growth in the deposit base contrasted with the reduction in domestic credit.
“Specifically, excess reserves—a narrow measure of liquidity—increased by US240.1 million to US$2,107.2 million, extending the US$24.6 million gain a year earlier. Similarly, excess liquid assets—a broad measure of liquidity—rose by US204.4 million to US$3,088.6 million, surpassing the US$26.4 million accumulation in the previous year.”
During the review period, external reserves grew by US$38 million to US$2,731.2 million, a turnaround from last year’s US$4.7 million decline. This was mainly due to the receipt of proceeds from the Government’s external borrowing activity.
“Reflecting this development, the Central Bank’s net foreign transactions with the public sector switched to a net inflow of US$272.3 million from a net outflow of US$38 million in the comparable 2023 period.
“The Central Bank’s net purchase from commercial banks widened to US$87 million, from US8.3 million in the year prior. Further, commercial banks’ net purchases from their customers registered US$73.5 million from an almost flat position in the preceding year,” the CBB reported.
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