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Monthly Economic and Financial Developments, December 2019

Published: Monday February 3rd, 2020

Domestic Economic Developments

Overview

Indications are that the domestic economy sustained its modest growth during the review period. Tourism maintained a positive momentum, bolstered by activity in New Providence markets and the Family Islands unaffected by Hurricane Dorian. Further, ongoing foreign investment projects provided stimulus to the construction sector, and to a lesser extent post-hurricane reconstruction work. In price developments, the domestic inflation rate firmed during the twelve months ending October, reflecting the rise in fuel costs. Monetary developments featured an expansion in bank liquidity, as the build-up in the deposit base outstripped the growth in credit; similarly, external reserves grew, buoyed by net foreign currency inflows from re-insurance and real sector activities.

Real Sector

Tourism

Indications are that tourism sector gains stayed healthy–though moderated–as acceleration in the sea segment contrasted with tempered growth in the value-added air component.

Official data provided by the Ministry of Tourism (MOT) revealed that, total arrivals for the ten months to October rose by 10.2%, surpassing the 8.2% growth in the previous year. In particular, sea traffic advanced by 10.2%, extending the 5.7% increase in 2018. Further, the air segment grew by 10.1%, albeit lower than the 16.9% expansion recorded a year earlier.

A disaggregation by market revealed that arrivals to New Providence increased by 14.5%, after tapering by 0.3% in 2018. This largely reflected a 14.7% recovery in the sea segment, vis-à-vis a 7.5% contraction in the prior year. In addition, air arrivals rose by 14.2%, but were below the previous year's advance of 19.4%.

For the Family Islands, total arrivals grew by 11.8%, notably lower than the 25.4% growth registered same period last year. The air component rose by a just 2.0%, discounted by paused activity on Abaco since September, while, the sea segment increased by 13.5%. In particular, year-to-date visits to Abaco declined by 6.0%, with the respective sea and air components decreasing, by 7.0% and 3.6%. Meanwhile, given damages sustained during the recent storm, traffic to Grand Bahama contracted by 18.1%, as both air and sea segments fell by 20.3% and 17.8%, respectively.

In more recent data for December 2019, the Nassau Airport Development Company Limited (NAD) revealed that total international departures rose by 9.9% in the final month, following a 12.3% acceleration in 2018. Specifically, the dominant U.S. segment increased by 10.9%, after a gain of 13.4% in the previous year, while non-U.S. departures grew by 4.5%, relative to 2018's expansion of 6.8%. For the year, total departures expanded by 12.8%, vis-à-vis an increase of 13.8% in same period last year, and depicted a 27.7% rise in departures since the recession in 2008. Specifically, growth in the non-U.S. component slowed to 5.7% from 17.3% in the prior period. Meanwhile, U.S. departures rose by 14.0%, vis-à-vis a 13.2% advance a year earlier.

Short-term rental market data provided by AirDNA revealed that activity remained positive in December. Specifically, total available listings strengthened by 10.5%, underpinned by growth across all major markets, while total booked listings rose by 27.9%. Bolstered by these developments, the average daily room rate (ADR) for both entire place listings and hotel comparable firmed by 0.6% and 1.3% to $411.34 and $155.42, respectively.

During 2019, the total available listings moved higher by 15.6% over 2018, reflecting overall improvements in entire place and private room listings. Likewise, bookings grew by 30.9%, vis-à-vis the previous year. However, the ADR for both hotel comparable accommodations and entire place listings reduced by 6.0% and 2.0%, to $152.44 and $394.67, respectively.

Prices

For the twelve months to October, the domestic inflation rate–as measured by the All Bahamas Retail Price Index-firmed by 38 basis points to 2.59%. A breakdown by category revealed that average prices for furnishing, household equipment & maintenance, and clothing & footwear rose, by 5.5% and 1.1%, respectively, contrasting with reductions recorded a year earlier. In addition, the rise in average prices quickened for transport (9.9%), restaurants & hotels (5.2%), alcoholic beverages, tobacco & narcotics (4.4%), health (3.9%), and miscellaneous goods & services (2.5%), respectively. In contrast, the increase in inflation rates slowed for housing, water, gas electricity & other fuels, and food & non-alcoholic beverages, while average cost reductions were noted for education, communication and recreation & culture.

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