Monthly Economic and Financial Developments, April 2012

Published: Thursday June 7th, 2012

Indications are that the domestic economy maintained its modest positive trajectory over the month of April. Tourism sector output strengthened, amid increased hotel earnings, while foreign investment and public sector infrastructure projects supported stable gains in construction activity. In terms of price developments, however, the recent firming bias in international oil prices continued to exert upward pressure on domestic inflation. In the fiscal sector, the Central Government’s overall deficit widened over the nine months of FY2011/12, as the growth in expenditure outpaced revenue intake. Monetary outcomes featured a less significant build-up in both bank liquidity and external reserves compared with the previous year’s levels which were boosted by foreign currency proceeds from the sale of the Government’s majority stake in the Bahamas Telecommunications Company Limited.

Tourism performance indicators suggest steady output gains during April. Based on provisional data from a sample of hotels in New Providence and Paradise Island, room revenues rose by 3.5% year-on-year, although below the comparative 9.6% advance in 2011. Underlying this outturn was a 7.8 percentage point increase in the hotel occupancy rate to 81.9%, which compensated for the 6.6% reduction in the average daily room rate to $272.93. For the four-month period through April, total room receipts firmed by 7.4%, a reversal from a 0.4% decrease in 2011, as a 5.4 percentage point advance in average occupancy negated the 1.4% decline in the average daily room rate to $259.77. While the majority of hotels recorded growth in occupancy levels, competitive constraints contributed to declines in average daily rates for more than half of the properties included in the survey.

Buoyed by the pass-through effects of elevated international oil prices, domestic inflation firmed by 1.4 percentage points to 3.2% over the twelve months to April. This outturn, mainly reflected an 8.0% surge in transportation costs—which are directly affected by fuel prices—alongside gains for furnishings, household equipment & maintenance (3.9%), housing & other related items (3.2%) and restaurant & hotels (3.1%) costs. All of the other categories recorded growth rates of less than 3.0%.

Domestic energy costs also continued to trend upwards during April. The Bahamas Electricity Corporation’s fuel charge rose by 1.9% on a monthly basis, and by 18.9% year-on-year, to 26.50¢ per kilowatt hour. Similarly, the average cost for both diesel and gasoline grew by 7.8% ($0.42) and 2.8% ($0.16) over the review month, to $5.79 and $5.75 per gallon, respectively, and were 14.4% and 8.9% higher on an annual basis.

Preliminary data for Government’s budgetary operations over the nine months of FY2011/12 showed the overall deficit increasing by $48.6 million (25.6%) to $238.4 million, compared to the total FY2011/12 budget estimate of $359.4 million. This outturn reflected growth in total expenditure of $101.4 million (8.3%) to $1,319.3 million, which eclipsed the $52.8 million (5.1%) gain in aggregate revenue to $1,080.9 million. At end-April, the Direct Charge on the Government stood at $3,854.6 million, a gain of 1.3% ($48.4 million) from end-2011.

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