Monthly Economic and Financial Developments, February 2010

Published: Thursday April 8th, 2010

Amid the incipient global recovery underway, domestic economic indicators showed tentative signs of stabilisation during February. Initial tourism sector statistics suggested a slightly positive outcome for the key stopover segment of the market, following the sharp downturn of a year earlier; and inflation pressures moderated further. On the monetary front, both liquidity and external reserves registered growth; however, the persistent weakness in private sector demand resulted in continued erosion in Government’s fiscal performance for FY2009/10.

Provisional data from a sample of large New Providence hotel properties indicated a marginal improvement in stopover arrivals, as well as spending patterns for the first two months of 2010. Room revenues were estimated to have improved by 4.9%, occasioned by a projected 2.6% gain in room nights sold, and a 2.5% increase in average daily room rates. Anecdotal indications are that average occupancy rates for this subset of properties have exceeded 60.0% for the review period.

Inflation for the twelve months to January eased by 2.9 percentage points to 1.8%, in contrast to a 2.2 percentage point advance to 4.7% a year earlier. This outturn reflected a 0.3% decline in housing costs––the most heavily weighted item in the index—compared to an increase of 3.7% in 2009. Additionally, average price gains moderated significantly for “other” goods & services, by 5.4 percentage points to 2.9%; for furniture & household operation, by 3.9 percentage points to 2.8%, and for food & beverages, by 3.0 percentage points to 4.1%. A slowdown in price increases of three (3) percentage points or under also occurred for recreation & entertainment services, medical care & health and transport & communication. In contrast, average prices firmed for education (2.8%) and clothing & footwear (2.0%). In terms of electricity, the fuel surcharge for the month of February rose by an average of 11.7% to 10.75 cents per kilowatt hour (Kwh) over the previous month, and by 3.8% when compared to a year earlier. The average price of diesel fell by 1.6% in January to $3.60 per gallon; while gasoline costs rose by 0.5% to $4.19 per gallon. However, on a year-on-year basis, the prices of both products were higher by 31.4% and 29.7%, respectively.

Government’s budgetary operations for the seven months of FY2009/10 revealed that the overall deficit widened by 25.8% to $200.3 million over the previous period, underpinned by increases in expenditures. Aggregate revenue steadied at $739.7 million, partly reflecting a doubling in non-tax receipts to $138.1 million from $71.0 million, which compensated for a 9.9% reduction in tax revenue to $601.6 million. In the context of sluggish consumer spending trends, taxes on international trade, as well as non-trade stamp taxes, declined by 8.1% and 22.8%, respectively. Total expenditure advanced by 4.7% to $940.0 million, as capital outlays expanded by 37.8% to $90.3 million, owing to a $28.5 million rise in spending on infrastructure projects—which negated a $6.7 million decline in asset purchases. In contrast, current expenditure weakened marginally by 1.0% to $786.1 million, reflecting lower outlays for consumption and subsidies and other transfer payments.

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