Monthly Economic and Financial Development (MEFD) May 2023

Published: Monday July 3rd, 2023

Domestic Economic Developments

Overview

Indications are that during the month of May, the domestic economy maintained its growth trajectory, although at a moderated pace, as the recovery converged closer to pre-COVID-19 pandemic levels. Tourism sector output continued to register strong growth, undergirded by robust gains in both the high value-added air segment and the sea component, given the persistent demand for travel in key source markets. In labour market developments, the All Bahamas unemployment rate decreased in May 2023, as the number of self-employed persons grew. On the fiscal front, Government’s budgetary operations for the first nine months of FY2022/23 revealed a narrowing in the deficit, as the expansion in revenue collections outpaced the rise in aggregate expenditure. Monetary sector developments featured a reduction in bank liquidity, despite a contraction in domestic credit, which outstripped the falloff in the deposit base. Nevertheless, external reserves grew, owing in part to the receipt of proceeds from Government’s external borrowings.

Real Sector

Tourism

Monthly data suggested that the tourism sector continued to register healthy growth, as increased demand for travel in key source markets contributed to robust growth in both the high value-added air segment and sea traffic.

Official data provided by the Ministry of Tourism (MOT) showed that total visitor arrivals rose to 0.8 million in May, from 0.5 million visitors in the same month of 2022. Specifically, the dominant sea component grew to 0.6 million, from 0.4 million passengers in the prior year. In addition, air traffic stabilised at 0.1 million—representing 94.2% of the pre-pandemic high that was recorded in 2019.

A breakdown by major port of entry showed that total arrivals to New Providence expanded to 0.3 million, from 0.2 million a year earlier. Supporting this outcome, the sea segment increased to 0.2 million from 0.1 million in the preceding year, while air traffic steadied at 0.1 million visitors. Further, foreign arrivals to the Family Islands amounted to 0.4 million, extending the 0.3 million visitors recorded a year earlier, owing to increases in both the sea and air components to 0.4 million and 34,410, respectively. In addition, arrivals to Grand Bahama measured 42,710, surpassing the 24,990 registered in the corresponding period of 2022, as respective sea and air visitors amounted to 38,572 and 4,138.

On a year-to-date basis, total arrivals rebounded to 4.2 million, vis-à-vis 2.5 million in the comparative period of 2022. Underlying this outturn, air arrivals increased to 0.8 million passengers, from 0.6 million in the previous year, bolstered by growth across all major source markets. Similarly, sea arrivals accelerated to 3.4 million, from 1.8 million visitors in the preceding year (see Table 1).

The most recent data provided by the Nassau Airport Development Company Limited (NAD) indicated that total departures—net of domestic passengers—rose by 17.7% to 132,367 in May, compared to the same period last year. Specifically, U.S. departures strengthened by 21.8% to 115,074, vis-à-vis the previous year. Conversely, non-U.S. departures fell by 4.0% to 17,293, relative to the comparative period last year. On a year-to-date basis, total outbound traffic advanced by 33.5% to 684,468 passengers. In particular, non-U.S. departures grew by 34.7% to 102,294, vis-à-vis the same period in 2022. Likewise, U.S. departures expanded by 33.3% to 582,174 visitors, compared to the corresponding period last year.

Positive trends were mirrored in the short-term vacation rental market. The latest data provided by AirDNA showed that in May, total room nights sold moved higher to 189,398, from 136,311 in 2022. Contributing to this development, the occupancy rates for both entire place and hotel comparable listings appreciated by 61.4% and 57.7%, respectively, relative to 54.7% and 51.7% in the preceding year. Further, as depicted in Graph 1, price indicators revealed that year-over-year, the average daily room rate (ADR) for entire place listings rose by 18.1% to $612.66 and for hotel comparable listings, by 4.1% to $200.59.

Employment

Reflective of the recovery in the domestic economy, labour market conditions improved, underpinned by the ongoing strengthening in the tourism sector. Based on data from the Bahamas National Statistical Institute’s Labor Force Survey for May 2023, the All Bahamas unemployment rate declined by 70 basis points to 8.8% in May 2023, compared to May 2019—when the latest available All Bahamas employment statistics were released—as the number of self-employed persons rose by 5.0% to 34,095 relative to May 2019. However, the number of employed persons decreased by 6.8% to 200,175, vis-à-vis May 2019. The labour force participation rate also fell to 75.9% compared to 82.9% in May 2019, as the number of discouraged workers increased by 2.3% to 2,035 in the review period.

Analysis by major markets revealed that the jobless rate in New Providence—the most populated centre―reduced by 50 basis points to 8.9% compared to May 2019. Likewise, the unemployment rate in the second largest market, Grand Bahama, fell by 10 basis points to 10.8% vis-à-vis May 2019. The jobless rate in Abaco was also 22 basis points lower at 7.1% over May 2019.

Fiscal

Provisional data on the Government’s budgetary operations for the first nine months of FY2022/23 revealed a narrowing in the deficit to $216.2 million from $336.2 million in the comparable FY2021/22 period. Contributing to this outcome, total revenue grew by $267.1 million (14.5%) to $2,112.6 million, overshadowing the $147.1 million (6.7%) expansion in aggregate expenditure to $2,328.7 million.

The growth in revenue collections was led by a $291.3 million (18.7%) increase in tax receipts. Specifically, taxes on goods and services rose by $118.2 million (10.8%) to $1,214.8 million, as VAT collections increased by $112.4 million (13.5%), to $947.5 million, underpinned by the ongoing strengthening in economic activity. In addition, financial & realty stamp taxes expanded by $28.8 million (55.7%), to $80.5 million. Further, revenue from gaming taxes moved higher by $11.8 million (31.4%) to $49.2 million. Likewise, taxes on the use or supply of goods and services advanced by $9.8 million (7.8%) to $135.9 million, on account of a rise in intake from business licenses ($8.1 million), motor vehicle taxes ($1.2 million) and company taxes ($1.2 million). Proceeds from international trade and transactions—inclusive of exports, customs & other import duties and departure taxes—also grew by $151.4 million (43.7%) to $498.0 million, relative to the previous fiscal year. In addition, property tax collections rose by $24.3 million (22.8%) to $130.7 million. In contrast, non-tax revenue reduced by $25.0 million (8.7%) to $261.5 million, as property income decreased by $25.8 million (39.8%) to $39.1 million, while proceeds from the sale of goods and services declined by $12.9 million (7.6%) to $157.5 million.

The expansion in expenditure was credited to a $113.2 million (5.6%) growth in recurrent spending, to $2,134.8 million. The outcome reflected a rise in interest payments, by $58.0 million (17.4%) to $391.8 million, due to expanded external debt obligations. Further, payments for employee compensation rose by $55.7 million (10.3%) to $594.0 million. Likewise, outlays for the use of goods & services advanced by $29.0 million (7.2%) to $432.0 million. In addition, disbursements for various miscellaneous payments grew by $21.4 million (11.3%) to $210.4 million, owing primarily to a rise in current transfers. Providing some offset, subsidies fell by $20.9 million (5.9%) to $330.4 million and outlays for social benefits, by $29.5 million (14.8%) to $170.1 million. Capital outlays also increased by $33.9 million (21.1%) to $193.9 million, as spending for the acquisition of non-financial assets grew by $42.4 million (33.9%) to $167.4 million. Meanwhile, capital transfers decreased by $8.5 million (24.3%) to $26.6 million.

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