Monthly Economic and Financial Developments, June 2008

Published: Wednesday August 13th, 2008

Preliminary indicators for the month of June suggest a mild pace of economic growth, amid relatively moderate levels of foreign investment led construction activity, stable consumer spending and weakened tourism activity. Over the first six months of the year, higher international energy and food costs continued to adversely impact domestic price levels, and the slowdown in global economic activity, associated in part with the US mortgage and financial market crises, resulted in a scaling down of domestic economic prospects.

In the tourism sector, data for the first five months of the year revealed that visitor arrivals contracted by 0.9% to 2.06 million, as the 1.5% expansion in air visitors was overshadowed by a 2.0% reduction in cruise passengers. In terms of the major ports, visitors to New Providence fell by 3.7%, based on a 9.1% decline in the dominant sea segment, which outstripped the 5.0% expansion in air visitors. Similarly, arrivals to Grand Bahama fell by 16.9%, reflecting contractions in both air (10.7%) and sea (19.9%) visitors. In the Family Islands, a 16.3% improvement in sea tourists eclipsed the 2.9% fall in air passengers, for a 12.6% gain in overall visitors.

Indications are that stopover arrivals from the United States contracted over the first five months, by 3.4% reflecting continued weakness in the economy, due to the housing and credit crises. However, visitors from the Canadian market strengthened by 25.3% benefiting from a combination of an aggressive marketing campaign, the strength of the Canadian dollar and more direct flight access to The Bahamas. Preliminary data also suggests that arrivals from Europe, Latin America and the Caribbean, which accounted for a combined 7.7% of the total, improved by 8.2%.

Preliminary data on the fiscal situation for the first ten months of FY2007/08 indicates an almost 30.0% improvement in Government’s deficit, vis¬-à¬-vis the previous year, to an estimated $77.6 million. Buoyed by heightened collections of international trade and property taxes, revenue receipts gained 6.0% to $1,148.1 million, partly offsetting a 2.76% rise in total expenditure to $1,225.7 million.

Domestic prices remained elevated, as evidenced by further increases in the price of gasoline (4.8%) and diesel (5.8%) in May, to $5.25 and $5.24 per gallon, respectively. Similarly, the Bahamas Electricity Corporation’s fuel surcharge strengthened by 12.0% to 18.74 cents per KWH in June. The rapid fuel cost increases also underlie the firming in the Retail Price Index for the 12¬month period ending June 2008, by 2.99%, approximately 0.57 percentage points higher than the previous year’s expansion. The most significant cost gains were recorded for furniture and household operation (7.10%), medical and health care (4.73%), food and beverages (4.03%), transport & communication (3.21%) and other goods and services (3.07%). The remaining index components reflected cost appreciations of less than 3%.

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