Quarterly Economic Review December 2022
Published: Wednesday March 15th, 2023
The Central Bank of The Bahamas is pleased to announce the release of its Quarterly Economic Review for the fourth quarter of 2022. The Review provides an examination of the performance of the domestic economy, as well as sectoral developments, principally during the period October to December.
Indications are that, during the fourth quarter, the domestic economy maintained its recovery momentum, from the adverse effects of the Novel Coronavirus (COVID-19) pandemic. Tourism output continued to record robust growth, undergirded by healthy gains in the high value-added air segment and the rebound in sea traffic, reflective of the relaxed pandemic restrictions and pent-up demand for travel in the key source markets. In addition, foreign investment projects, and to a lesser extent post-hurricane reconstruction work, continued to provide positive impulses to the construction sector. In price developments, domestic inflation remained elevated over the review quarter, reflective of the pass-through effects of higher global oil prices and increased costs for imported goods.
Preliminary estimates revealed that during the second quarter of FY2022/23, the Government’s overall deficit widened, relative to the comparative quarter of FY2021/22. Underlying this outturn, spending recovery paced faster than the VAT-led growth in revenue, buoyed by improving economic conditions. Budgetary financing was mainly obtained from internal sources and a drawdown in IMF Special Drawing Rights (SDRs).
Monetary developments featured a contraction in bank liquidity, as the expansion in domestic credit, contrasted with the reduction in the deposit base. Correspondingly, external reserves declined, attributed to the seasonal increase in demand for foreign currency, as well as conversion of the IMF SDR allocations. Further, banks’ credit quality indicators improved during the review quarter, underpinned by the sustained strengthening in the domestic economy and ongoing loan write-offs. In addition, the latest available data for the third quarter indicated a rise in banks’ overall net income, led by a decrease in bad debt provisioning.
In the external sector, the estimated current account deficit narrowed during the review quarter, on account of a marked increase in the services account surplus, bolstered by ongoing gains in tourism earnings. In contrast, the financial account balance switched to a net outflow, vis-à-vis an inflow in 2021, owing primarily to a reversal in other investment transactions to an outflow from an inflow a year earlier and a surge in portfolio investment outflows, associated with residents’ purchase of Government’s external bonds.
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