Monthly Economic and Financial Developments, August 2010

Published: Wednesday October 6th, 2010

Against the backdrop of a fragile recovery in the global economy, domestic economic activity remained sluggish during the month of August. Tourism output showed a modest upturn, supported by a rebound in the high value-added air segment of the market; however, indications are the performance of the construction sector remained lacklustre, given the softness in both foreign direct investment and domestic housing activity. Persistent weakness in tax revenue, combined with increased expenditure, led to a deterioration in the overall fiscal deficit. In monetary developments, both liquidity and external reserves declined, owing to net foreign currency outflows related to the traditional—though tempered—foreign currency demand to facilitate imports, as well as banks’ profit repatriations.

Preliminary data indicates that tourism output grew modestly over the eight months of the year, benefitting from the ongoing recovery in the main North American markets, as well as a number of promotional campaigns aimed at boosting stopover arrivals. Initial data from a sample of hotels in Nassau and Paradise Island showed total revenue growing by 7.7% to $167.0 million, due to a 3.1 percentage point gain in average occupancy to 69.3% and a 2.8% improvement in average daily room rates to $241.06.

Government’s fiscal deficit deteriorated by $17.4 million (37.5%) to $63.8 million over the first two months of FY2010/11, explained by a $4.9 million (2.6%) reduction in total revenue to $182.8 million and a $12.4 million (5.3%) increase in aggregate spending to $246.6 million. Depressed import demand and a reduction in taxes related to property sales, led to a 1.5% fall in tax revenue to $169.0 million. A steeper fall-off in non-tax inflows, by 15.0% to $13.8 million was broadly based across the major categories. In terms of expenditure, the growth in capital outlays, of 67.4% to $28.3 million, was associated with a $8.5 million hike in land purchases to $8.8 million; alongside higher spending on infrastructure projects of 24.6% to $18.4 million. The 1.1% advance in current spending to $213.2 million corresponded to higher interest and transfer payments.

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