News

Monthly Economic and Financial Developments, March 2018

Published: Tuesday May 1st, 2018

Overview

Preliminary economic indicators suggest that the domestic economy continued to expand modestly during the month of March. Increased holiday-related travel contributed to gains in tourism output, while foreign investment projects buoyed construction sector activity. Government’s budgetary operations featured a reduction in the fiscal deficit over the first eight months of FY2017/18, led by a decline in capital spending and an increase in tax revenues. In addition, owing mainly to net foreign currency inflows from real sector activities, both liquidity and external reserves expanded.

Real Sector

Tourism

Initial data suggests that in the month of March, tourism activity was relatively brisk, as the sector benefitted in part from the early start of the Easter holiday period. According to data from the Nassau Airport Development Company Ltd. (NAD), visitor departures at the Lynden Pindling International Airport (LPIA)—net of domestic passengers—grew by 20.9% during the review month, a reversal from the 10.2% reduction in the comparable period of 2017. Supporting this outcome, both United States (US) and non-US returning passengers firmed by 20.9% and 21.0%, respectively, in contrast to declines of 11.6% and 1.3% a year earlier.

An analysis of airport data for the first quarter showed a similar trend, as net passenger departures through LPIA increased by 13.8%, vis-à-vis a 6.5% decline in the same period of 2017. In the underlying developments, US passengers firmed by 13.2%, a turnaround from a 7.0% decrease recorded in the prior period, while non-US international traffic advanced by 17.1%, in contrast to a 3.9% falloff last year. A review of longer-term trends showed that the level of departure traffic for the first quarter was the highest recorded since the comparable pre-recession period of 2008.

Fiscal Sector

During the first eight months of FY2017/18, the deficit contracted by $84.1 million (27.2%) to $224.7 million, when compared to the same period of the prior year. Underlying this development, total expenditure fell by $70.8 million (4.6%) to $1,453.3 million, while aggregate revenue firmed by $13.3 million (1.1%) to $1,228.6 million.

The decline in total expenditure reflected mainly a halving in capital outlays to $98.3 million from $198.2 million, as the unwinding in hurricane–related spending led to a $74.0 million (46.8%) reduction in capital formation. Similarly, asset acquisitions decreased by $25.9 million (64.4%). In a partial offset, current expenditure rose by $29.3 million (2.2%) to $1,355.1 million, due mainly to a $45.1 million (6.6%) increase in consumption outlays. In terms of the various categories, both personal emoluments and purchases of goods and services moved higher, by $21.5 million (4.7%) and $23.6 million (10.8%), respectively. In contrast, transfer payments contracted by $15.8 million (2.4%), as the $25.3 million (5.4%) decrease in subsidies and other transfers—owing mainly to reduced subsidies to the Ministry of Tourism—outpaced the rise in interest payments, by $9.6 million (5.3%).

In terms of revenue, tax receipts firmed by $15.3 million (1.4%) to $1,097.4 million. Notably, receipts from value-added taxes (VAT) expanded by $13.2 million (3.2%) to $430.7 million; motor vehicle taxes, by $7.3 million (56.9%) and stamp taxes on financial and non-trade transactions, by $2.2 million (3.1%). In addition, other “unclassified” taxes rose by $19.5 million to $23.0 million. In contrast, declines were noted for property taxes, by $8.5 million (11.9%); taxes on international trade, by $8.1 million (2.3%)—owing to reduced import duties; receipts from business & professional fees, by $7.3 million (13.3%) and selective taxes on services, by $1.5 million (8.0%). Further, total non-tax revenue eased by $2.0 million (1.5%) to $131.1 million, as the $14.6 million (37.6%) reduction in income proceeds, eclipsed an $11.7 million (12.5%) gain in fines, forfeits & administrative fees.

At the eight-month point of the fiscal year, the Government’s deficit was approximately 70% of its target for FY2017/2018. Estimated capital outlays were less than half of the allocated total, while current spending comprised 60.7% of budgeted approvals. Similarly, both non-tax and tax revenues were approximately 67.2% and 56.5% of the respective forecasted amounts.

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