News

Monthly Economic and Financial Development, July 2019

Published: Wednesday September 4th, 2019

Domestic Economic Developments

Overview

Preliminary indications are that the domestic economy maintained its modest upward trajectory during the review period. In particular, gains in tourism sector output continued to be supported by the rise in the high value-added stopover visitor segment, while activity in the construction sector was fueled by a number of varied-scale foreign investment-related projects. In this environment, employment conditions continued to improve gradually, as the jobless rate fell to a decade low of 9.5%. Monetary sector developments were dominated by the growth in deposits, which outpaced the expansion in credit and resulted in an increase in bank liquidity, while external reserves expanded, buoyed by net foreign currency inflows from real sector activities.

Real Sector

Tourism

Preliminary evidence suggests that the tourism sector continued to strengthen during the review period, led by broad-based stopover gains in the New Providence market, while the expansions in Grand Bahama and the Family Islands were isolated within the cruise segment.

The latest official data from the Ministry of Tourism (MOT), showed that total visitor arrivals firmed by 18.8% in June, extending the 9.6% growth recorded in the prior year. In the underlying developments, the high volume, sea traffic segment expanded by 22.9%, outpacing the 7.3% uptick in the prior year, while the increase in the high value-added air component slowed to 8.7%, from 15.7% in 2018.

A breakdown by island, revealed that the improvement in aggregate arrivals was anchored by a rebound in the New Providence market, to a 20.5% increase, vis-a-vis the previous year's 2.4% contraction, attributed to gains in both air and sea arrivals by 14.3% and 24.6%, respectively. In contrast, the growth in visitors to the Family Islands slowed to 20.1%, from 28.1% in the prior period, amid a deceleration in gains in sea traffic to 24.9% and a 1.3% falloff in air arrivals. Similarly, the increase in total arrivals to Grand Bahama narrowed to 7.4% from 19.8% a year ago, as the 23.4% decline in air traffic, eclipsed an 11.7% improvement in sea visitors.

On a year-to-date to basis, total arrivals rose by 14.1%, outstripping the 4.1% growth last year, as gains in air and sea visitors quickened to 15.9% and 13.5%, from 15.2% and 0.8%, respectively. A breakdown by market, revealed a 22.9% increase in arrivals to New Providence, as the completion of the phased opening of a major foreign investment project, contributed to the rise in air arrivals, while the sea segment also strengthened. A smaller gain of 8.7% was reported for the Family Islands, owing to reduced growth in both the air and cruise segments. Meanwhile, Grand Bahama traffic contracted by 12.6%, on account of a weakening in both market segments.

Buoyed by the sustained improvement in the key stopover segment, data from The Bahamas Hotel & Tourism Association (BHTA) and the MOT for the month of June, showed positive indicators for the hotel sector, as the average daily room rate (ADR) increased by 4.3% to $243.32, while the number of room nights sold firmed by 13.4%. As a consequence, the average hotel occupancy rate advanced by 6.9 percentage points to 75.0%, while total room revenue rose by 18.0%. On a year-to-date basis, the average occupancy rate climbed by 10.6 percentage points to 76.5%, and the number of room nights sold strengthened by 20.0%. Further, a 9.2% increase in the ADR to $280.83, contributed to the modest 3.0% expansion in room revenue over the six-month period.

Indications are that the positive tourism trends were sustained in July, as the latest data from the Nassau Airport Development Company Ltd. (NAD), showed that total departures -net of domestic traffic- firmed by 10.3%, outpacing the 8.8% increase recorded in the prior period. Specifically, the growth in the dominant U.S. segment quickened to 11.4% from 8.5%, while gains in non-U.S. departures slowed notably from 11.9% to a mere 1.1%. Similarly, during the seven-month period, total departures expanded by 17.8%, extending the 11.8% growth recorded over the same period of 2018. In particular, U.S. departures rose by 19.3%, vis-a-vis an 11.0% advance a year earlier; however, the growth in the non-U.S. component slowed to 8.9%, decelerating from 16.5% in the prior period.

The short-term rental market benefitted from gains in the stopover visitor segment, as the latest data from AirDNA showed that the total number of room nights sold rose by approximately 29.3% in July over the same period last year, as bookings for hotel comparable and entire place listings firmed by 45.3% and 28.0%, respectively. In terms of pricing, the ADRs for both hotel comparable and entire place listings contracted by 12.8% to $154.42 and by 8.9% to $404.67, respectively, reflecting broad-based decreases in most of the major markets.

Employment

The latest employment data from the Department of Statistics' Labour Force Survey, revealed a notable improvement in conditions, with the number of employed persons advancing by 3.2% relative to May 2018, and by 1.9% vis-a-vis November 2018, due to increased private sector employment. As a result, the unemployment rate fell by 50 and 120 basis points, when compared to May and November 2018, respectively, to 9.5%--the lowest rate recorded since 2008.

A breakdown by island, showed that the unemployment rate in New Providence declined by 1.6 percentage points to 9.4% over the six-month period, and fell by 0.6 percentage points vis-a-vis the prior year. Similarly, the jobless rate in Grand Bahama declined by 1.0 and 1.5 percentage points over the rates recorded in May and November, respectively, to 10.9%; although it remained above the pre-recession level. In Abaco, the unemployment rate fell by 1.4 percentage points to 9.3% vis-a-vis last May, but stood 1.6 percentage points higher when compared to the November 2018 survey.

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