Monthly Economic and Financial Developments, January 2013

Published: Friday March 8th, 2013

Indications are that the domestic economy continued its mild pace of growth during January, as foreign investment and, to a lesser extent public sector projects, supported construction activity, while tourism output appeared to soften, amid a decline in occupancy levels. In the absence of a broad-based recovery, unemployment levels remained elevated, and inflation was relatively benign. The fiscal performance deteriorated for the first half of FY2012/13, as revenues normalized following the year-earlier extraordinary flows, and salary related payments, alongside infrastructure project commitments, boosted spending levels. Monetary developments featured a contraction in both liquidity and external reserves, associated with normal demand for imports.

Preliminary hotel performance indicators for January, based on a sample of major hotels in New Providence and Paradise Island, reported a 1.6% year-on-year decline in total room revenues, which remained some 21.0% below 2008 levels. Although the average daily rate improved by 3.5% to $240.57, the average occupancy rate fell by 1.5 percentage points to 57.9%. In addition, approximately six (6) of the nine (9) properties surveyed experienced a fall-off in revenue, while the partial closing of a major property contributed to a 2.4% contraction in available room stock.

Based on the latest available data, the rate of increase in consumer price inflation for the twelve-months to October 2012 softened by 0.6 of a percentage point to 2.35%. The outturn included a deceleration in average price gains for transportation, to 2.64% from 8.70% in the comparative 2011 period, alongside notable declines in inflation rates for restaurant & hotels (by 1.0 percentage point to 1.81%), furnishing, household equipment & maintenance (by 0.9 of a percentage point to 2.8%) and education (by 0.9 of a percentage point to 2.36%).

Preliminary data on the Government’s operations for the first half of FY2012/13 showed a widening in the overall deficit, by $102.7 million (62.9%) to $266.0 million. Total revenue contracted by $51.9 million (7.2%) to $664.8 million, while aggregate expenditure was higher by $50.8 million (5.8%) at $930.8 million. In terms of receipts, tax collections weakened by $37.1 million (6.0%) to $583.1 million, reflecting mainly an $86.3 million (41.6%) contraction in excise tax receipts back to trend levels, following the significant one-time inflow in the prior period. In contrast, gains were recorded for departure taxes ($34.4 million), property taxes ($11.2 million), business & professional fees ($3.9 million) and other “miscellaneous” taxes ($3.3 million). Further, non-tax collections rose marginally by $3.0 million (3.8%) to $81.7 million, owing mainly to a timing-related advance in income from public enterprises and growth in fines, forfeits & administrative fees. The expansion in expenditure was led by a $33.8 million (4.8%) rise in current outlays to $745.7 million, reflecting a $15.8 million gain in consumption spending, related mainly to increased salary payments, while higher subsidies to a public entity boosted transfers by $17.9 million. Capital outlays also grew, by $15.3 million to $115.1 million, with a dominant $18.2 million (23.6%) absorbed by infrastructure works.

The deficit for the six-month period was financed mainly from domestic sources, and comprised the issuance of $325.0 million in Registered Stock, $55.0 million in Treasury bills and $53.0 million in short-term advances. On the external side, $180 million was obtained by way of an international bond in December, with a further $34.7 million derived from project-based loan financing.

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