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Monthly Economic and Financial Developments, December 2017

Published: Wednesday January 31st, 2018

Overview

Preliminary indicators suggest that domestic economic activity continued to improve gradually during the review period. Growth in visitor departures from the country’s main airport supported gains in tourism sector output, while foreign investment-related projects remained the dominant driver of construction sector activity. In labour market developments, the All Bahamas unemployment rate rose slightly as the gains in private sector hiring’s were countered by a reduction in Government employment and the addition of new graduates to the labour force. Reflecting an expansion in revenue and a reduction in expenditure, the fiscal deficit narrowed over the first five months of FY2017/2018. Further, bank liquidity contracted in December, owing in part an increase in short-term credit to the Government, while sustained public sector demand, contributed to the decline in external reserves.

Real Sector Tourism

The latest available data from the Nassau Airport Development Company Ltd. (NAD) showed that the year-on-year improvement in visitor arrivals—which commenced in October—was sustained in December. Specifically, total departing visitor traffic, net of domestic departures, firmed by 5.1%, extending the 4.1% expansion registered a year earlier. Underlying this outcome, non-US international departures strengthened by 14.5%, a reversal from a 4.2% decline in December 2016. In addition, departures to the main United States market firmed by an additional 3.4%, after the 5.7% increase registered in the prior period.

An analysis of longer-term trends for the year revealed that despite periods of growth during the fourth quarter, declines during earlier months contributed to a 0.8% softening in the number of international departures from the Nassau airport in 2017, relative to a gain of 1.0% in the prior year. In particular, the high volume U.S. component decreased by 0.6%, a reversal from a 1.9% uptick in the previous period, while non-U.S. international departures fell by an additional 1.8%, after a 4.1% contraction in 2016.

Employment

Based on data from the Department of Statistics’ Labour Force Survey for November 2017, the All Bahamas unemployment rate firmed by 20 basis points relative to the previous six-month period to 10.1%, but was still 1.5 percentage points lower versus November 2016. By major job market, the jobless rates in New Providence and Abaco grew by 20 and 80 basis points, respectively over the six-month period; however they still improved, by 2.3 and by 0.5 percentage points, vis-à-vis the same period of 2016. On a positive note, Grand Bahama unemployment rate fell by 30 basis points compared to May and by 120 basis points relative to November 2016, to 12.1%.

Amidst the addition of a new cohort of graduates in June, the unemployment rate among young persons (15 to 24 years old) increased by 2.1 percentage points during the six-month period to 22.0%; while the number of discouraged workers advanced by 5.7% to 2,035 persons.

Fiscal Sector

Data on the Government’s budgetary operations for the first five months of FY2017/18, showed that the deficit narrowed by $85.8 million (33.8%) to $168.1 million. Underpinning this development was a $28.9 million (4.1%) increase in total receipts to $738.0 million, and a $56.9 million (5.9%) reduction in total expenditure, to $906.1 million.

The improvement in revenue was undergirded by a $27.2 million (4.3%) rise in tax receipts to $659.2 million, amid a $15.7 million (6.0%) increase in value-added tax (VAT) collections. Broad-based gains also occurred for most of the remaining categories, with receipts from taxes on international trade firming by $7.7 million (3.7%)–due mainly to higher excise taxes. In addition, business & professional fees rose by $6.0 million (46.2%), on account of gains in general business license fees, while higher gaming tax revenue was responsible for the $1.5 million (15.5%) advance in selective taxes on services. Further, “other” miscellaneous taxes were virtually unchanged, as the $7.4 million (42.6%) falloff in unclassified stamp taxes, negated gains in motor vehicle and property taxes. In addition, non-tax receipts firmed by $1.7 million (2.3%) to $78.7 million, buttressed by an expansion in proceeds from fines, forfeits and administrative fees, which eclipsed decreased in income from other sources.

The reduction in expenditure was solely attributed to a halving in capital outlays, by $61.0 million, to $59.7 million. The ratcheting down of hurricane-related spending decreased infrastructure expenditure by $48.1 million (48.8%), while asset acquisitions declined by $13.0 million (58.3%). In contrast, current expenditure edged-up by $4.3 million (0.5%) to $846.4 million, driven by a $40.0 million (9.4%) increase in consumption outlays. Specifically, spending for wages and salaries grew by $22.7 million (7.9%), and purchases of goods and services advanced by $17.2 million (12.4%), mainly on account of a $23.1 million increase in “other” contractual services. In contrast, transfer payments declined by $35.8 million (8.6%), underpinned by a reduction in health-related subsidy payments.

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