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Monthly Economic and Financial Developments, August 2013

Published: Wednesday October 2nd, 2013

Domestic economic activity remained relatively subdued in August, amid ongoing softness in the tourism sector’s performance, although foreign investment-related construction activity continued to provide a steady positive contribution. In other real sector outcomes, consumer price indications featured modest gains in domestic fuel costs, due to the recent firming in global oil prices. The fiscal deficit declined for the first month of FY2013/14, reflecting broad-based gains in revenues, combined with a lower aggregate expenditure level. In the monetary sector, both liquidity and external reserves contracted moderately in August, consistent with the seasonal increase in foreign currency demand to facilitate current payments.

Preliminary hotel performance indicators for August, based on a sample of major hotels in New Providence and Paradise Island, showed that total room revenues fell by an additional 8.0% during the review month, following a 7.0% contraction in the prior period. This outturn reflected a 4.4 percentage point reduction in the occupancy rate to 71.3%, which eclipsed the 1.3% gain in the average daily room rate (ADR) to $208.61. In addition, over the eight month period, revenues from the properties surveyed contracted by 7.0%, owing to a broad-based decrease in the occupancy rate by 4.9 percentage points to 69.8%, which outweighed the 3.0% rise in the average daily room rate (ADR) to $245.76.

Consistent with the modest uptrend in international oil prices, domestic fuel costs rose during the month of August. Specifically, the prices of gasoline and diesel grew by 2.4% and 2.7% over the month, to $5.44 and $4.99 per gallon, and on an annual basis, both fuels firmed by 3.4% and 2.5%, respectively. In contrast, the Bahamas Electricity Corporation’s fuel charge declined by 2.5% in August to 26.65¢ per kilowatt hour (kWh), and by 2.9% year-on-year.

The Government’s overall deficit for the first month of FY2013/14 narrowed by $9.4 million (38.5%) to $15.0 million, buoyed by a $5.1 million (4.8%) expansion in total revenue to $112.4 million and a $4.3 million (3.3%) reduction in aggregate expenditure to $127.4 million. On the revenue side, the modest increase in tax receipts, by $2.3 million (2.3%) to $102.0 million, included a $9.5 million (24.4%) advance in ‘other’ taxes and a $1.3 million rise in selective taxes on services, which outweighed the $7.7 million contraction in taxes on international trade. Further, the $2.8 million (37.3%) gain in non-tax revenue to $10.4 million was primarily explained by a $3.4 million hike in income from fines, forfeitures & administrative fees, which offset broad-based declines in the other components. The contraction in aggregate expenditure was led by a $9.3 million (67.4%) decrease in capital outlays to $4.5 million, reflecting reduced spending on infrastructure developments and asset acquisitions, by $7.7 million and $1.1 million, respectively. In contrast, recurrent spending expanded by $4.6 million (3.9%) to $121.9 million, as the $5.5 million increase in debt-related transfer payments, outstripped a $0.9 million fall in consumption outlays.

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