Advance Release of Domestic Economic Review for 1st qtr 2005

Published: Wednesday June 15th, 2005

Indications are that the Bahamian economy continued to strengthen during the first quarter of 2005, in a climate of subdued inflation. Increased construction stimulus, from intensifying foreign investment inflows, residential investments and hurricane repairs, outweighed the comparative decrease in tourism output, which remained constrained mainly by the reduced capacity in Grand Bahama. While the fiscal outlook was improved, expenditure growth outpaced the rise in revenue, resulting in a widening in the budget deficit for the third quarter of FY2004/05. Financial sector trends featured accelerated expansion in domestic credit, which trailed growth in the monetary aggregates, for further improvement in bank liquidity. In the context of the Central Bank's more accommodative policy stance, interest softened broadly, albeit with some widening in the average loan-to-deposit rate spread. On the external side, the estimated current account deficit widened, partly on account of an increase in the oil import bill. Meanwhile, a more than two-fold hike in net private foreign investments underpinned a significant boost in the surplus on the capital and financial account.

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