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Monthly Economic and Financial Developments, December 2009

Published: Wednesday February 10th, 2010

Amid signs of a nascent recovery underway in the global economy, key industry trends suggest some stabilizing in tourism output during December; however the softness in construction activity persisted and consumer demand tapered from its traditional year-end peak. Inflationary pressures abated from year-earlier levels, while monetary developments featured declines in both liquidity and external reserves.

Although both occupancy and average daily rates showed modest improvements in December, information for the eleven months to November, showed a contraction in tourism output as the fall-off in the high value-added stopover segment of the market engendered a number of incentive programmes by hotels in a bid to support their operations. There was a 6.0% upturn in total visitors to 4.2 million, a turnaround from the previous year’s 4.8% contraction, occasioned by a 14.3% increase in the sea component, which outweighed the 11.1% downturn in air arrivals. On a destination basis, total visitors to New Providence grew by 6.7%, with the 16.0% gain in sea traffic eclipsing the 6.6% decline in air passengers. Similarly, tourists to the Family Islands advanced by 5.4%, upheld by an 11.0% rise in the more dominant sea arrivals. In the Grand Bahama market, the 4.7% hike in visitors was explained by 17.1% expansion in sea traffic, which offset the 24.5% reduction in air visitors.

Reflective of the pass-through effects of the broad-based decline in international commodity prices from their record highs in mid-2008, inflation for 2009 slowed by 2.4 percentage points to 2.1%, following a 2.0 percentage point advance to 4.5% in 2008. Average price increases moderated for food & beverages (4.8%), “other” goods and services (3.5%), furniture & household operations (3.2%), medical care & health (2.3%), transport & communication (1.8%) and recreation entertainment & services (0.7%). Further, housing costs fell marginally by 0.1% vis-à-vis 2008’s 3.5% gain; whereas average prices firmed modestly for education and clothing & footwear, to 3.0% and 1.9%, respectively. For electricity prices, the average fuel surcharge for December retreated by 23.4% to 9.38 cents per kilowatt hour (kWh) over the previous month, and by 47.5% from a year ago.

Data on the Government’s budgetary operations for the first five months of FY2009/10 showed the overall deficit widening by 14.0% to $138.7 million over the previous fiscal year, as the 6.7% rise in aggregate expenditure overshadowed the 4.9% improvement in revenues. Specifically, tax receipts declined by 11.6% to $413.8 million, owing mainly to contractions in international trade (9.4%), property related stamp (24.5%) and other “miscellaneous” (21.1%) taxes. Conversely, non-tax collections rose more than four-fold to $121.5 million, buoyed by one-off and dividend receipts. In terms of expenditure, current spending softened by 0.2% to $556.6 million, occasioned by reductions in outlays for goods & services (1.7%), as well as transfers and subsidies (5.1%), which negated increases in interest payments (11.1%). In contrast, capital expenditure advanced by 39.3%, linked to a significant increase in outlays for infrastructure development projects, including the main seaport expansion and road rehabilitations.

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