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Monthly Economic and Financial Developments, March 2008

Published: Friday May 2nd, 2008

Preliminary indicators for the month of March suggested a continuation of a mild economic outturn, supported by relatively stable growth in consumer spending and net tourism inflows; and, as anticipated, with less contribution from foreign investment activity. Monetary developments featured strong growth in both liquidity and external reserves, following the receipt of proceeds from the Government’s US$100 million bond issue; and credit quality indicators of commercial banks’ loan portfolios remained relatively stable over the end-December 2007 levels.

The most recent data on the tourism sector, indicated a significant rebound in overall arrivals for the year-to-date February 2008, compared to the same period last year. Total arrivals recovered by 3.8% to 0.8 million visitors, after registering a 7.1% decline a year earlier, with both air and sea arrivals improving by 6.7% and 2.6%, respectively. A 6.1% fall-off in the dominant sea component primarily explained the overall 0.9% drop in arrivals to New Providence, although mitigated by the 8.7% upturn in the higher spending air visitor segment. Weakness in the Grand Bahama market persisted, with declines in both air (2.2%) and sea (13.7%) arrivals culminating in a 10.0% reduction in visitor traffic. For the Family Islands, growth in arrivals was extended to 19.1% from 15.0% last year, largely on account of a nearly 21.3% gains in sea visitors.

Based on initial estimates for the first eight months of FY2007/08, the Government’s overall deficit widened by 24.4% ($18.2 million) to $92.7 million. Expenditures grew by 2.8% to $966.1 million, surpassing the 1.0% rise in revenue receipts to $873.4 million. Growth in current spending of 5.1% included a higher wages and salaries bill, as well as increased outlays for transfers and subsidies; while reduced spending for infrastructure projects tempered capital expenditure by 5.9%. A $14.6 million (1.8%) gain in tax receipts, mainly for international trade, hotel services and business & professional fees, underpinned the expansion in revenue, whereas a timing-related decrease in other “miscellaneous” income was primarily behind the $6.0 million (7.8%) decline in non-tax revenue.

High prices continued to dominate the domestic economic landscape. Average consumer prices rose by 2.37% during the twelve-month period ending March 2008, up marginally from 2.29% last year, reflecting the persistent high global prices for oil and other commodities. The most significant cost increases were noted for furniture and household operation (6.57%), food and beverages (3.80%), medical and health care (3.52%) and transport & communication (3.10%), with cost appreciations of less than 3% posted for the remaining categories.

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