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Monthly Economic and Financial Developments, June 2013

Published: Thursday July 25th, 2013

Preliminary data suggests that economic conditions were relatively flat in June, reflecting persistent softness in the main tourism sector, although construction sector activity continued to benefit from ongoing foreign investment and public infrastructural projects. The outcome is unlikely to have provided opportunities for employment gains, while price developments continued to be favoured by the further easing in international oil prices. In the fiscal sector, a combination of reduced revenue intake and higher expenditures led to the overall deficit deteriorating over the ten months of FY2012/13, and monetary developments were marked by contractions in both bank liquidity and external reserves, due mainly to a seasonal increase in demand for foreign currency.

A combination of economic weakness in key source markets and increased competition from other destinations constrained growth in tourist arrivals over the first four months of the year, to 2.7% from 8.3% in 2012, for a 2.3 million visitor count. The high value-added air segment contracted by 6.8%, contrasting with the prior year’s 10.2% expansion, while the 5.4% rise in sea traffic extended the year-earlier 7.8% gain. By port of entry, visitors to New Providence firmed by 9.6% to 1.3 million, as a 17.1% hike in the dominant sea segment outpaced the 6.8% decline in air arrivals. In contrast, the Grand Bahama market fell by 2.4%, on account of a 21.0% reduction in air visitors, which outweighed the 0.8% rise in the sea component. The 6.8% drop in visitors to the Family Islands was primarily explained by a 7.7% falloff in the dominant sea traffic, as air arrivals were higher by 1.7%.

Based on a sample of 14 major hotels in New Providence and Paradise Island, room revenues contracted by 6.4% over the period January to May, 2013, which was consistent with the falloff observed in the high value-added stopover segment of the market. Broad-based monthly declines led to a 4.6 percentage point contraction in occupancy to 67.8%, which outpaced the 3.1% rise in the average daily room rate (ADR) to $257.58.

Domestic consumer price inflation, as measured by the Retail Price Index, moderated by one half to 1.6% over the 12 months to February, as lower fuel prices contributed to a slowing in average transportation cost increases, to 0.9% from 8.7% in the comparative period. Average price gains also slackened for restaurant & hotels, to 0.9% from 3.0%; furnishing, household equipment & maintenance, to 2.1% from 4.1%, education, to 1.7% from 2.9%, housing, water, gas, electricity & other fuels—the most heavily weighted item on the index, to 2.7% from 3.1%, medical care & health, to 1.5% from 1.7%, and miscellaneous goods & services, to 0.5% from 0.6%. For communication and recreation & culture, average costs contracted by 2.4% and 0.5%, respectively, in contrast to year earlier hikes of 1.3% and 1.0% in 2012. In a modest offset, average inflation rates for clothing & footwear and food & non-alcoholic beverages firmed to 0.8% and 2.5% from 0.2% and 2.2%, while gains in alcohol, tobacco, & narcotics average costs stabilized at 1.3%.

Domestic energy costs increased slightly in June, as the prices of diesel and gasoline rose by 0.2% each on a monthly basis, to $5.05 and $5.39 per gallon; however, when compared to the previous year, the costs of both fuels fell by 3.6% and 2.4%, respectively. The Bahamas Electricity Corporation’s fuel charge was unchanged at 28.40 cents per kilowatt hour during the review month, but stood 5.3% above the previous year’s level.

The Government’s deficit for the ten months of FY2012/13 widened by $126.3 million (47.7%) to $391.0 million, as total revenues contracted by $66.1 million (5.5%) to $1,136.2 million and aggregate expenditure rose by $60.2 million (4.1%) to $1,527.2 million. Underpinning the reduction in receipts was a $46.6 million (4.4%) contraction in tax collections, to $1,016.3 million, as the $90.4 million (15.1%) decrease in taxes on international trade, outstripped gains in the other categories. Non-tax revenue fell marginally by $1.8 million (1.5%) to $119.8 million, owing to a timing-related reduction in income. On the spending side, current outlays rose by $40.1 million (3.3%) to $1,253.5 million, due mainly to increased transfers to public health care entities. Consumption spending firmed by $12.7 million, occasioned by a $16.3 million (3.4%) rise in personal emoluments, which eclipsed the $3.6 million (1.3%) reduction in goods and services purchases. Infrastructure related projects pushed capital outlays higher by $23.8 million (14.5%) to $187.7 million, while net lending fell by $3.7 million (4.1%) to $85.9 million.

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