Monthly Economic and Financial Developments, March 2011

Published: Wednesday May 11th, 2011

The domestic economy continued to exhibit stable trends over the review month, supported in part by both foreign-investment and public sector-related construction activity. However, tourism output softened somewhat and in the absence of a more broadly-based improvement in general economic activity, domestic demand remained anaemic and the unemployment rate relatively high. Inflationary pressures moderated over the twelve-months to January, although the ongoing rise in international oil prices sustained the uptrend in energy costs. Buoyed by a number of one-time revenue inflows, Government’s deficit improved over the nine months of FY2010/11, while monetary developments for the review month featured a contraction in liquidity and lower accretions to external reserves, largely explained by a commercial bank’s capital repatriation activity.

Preliminary data from a sample of large hotels in New Providence and Paradise Island for the first quarter of the year revealed a decline in hotel revenues, by an estimated 4.1%, although there was significant variability across the various properties. This outturn was occasioned by a 3.0% reduction in the average daily room rate to $252.71, along with a 0.9 percentage point decrease in the average room occupancy rate to 66.3%.

Inflation for the twelve months to January—as measured by the Retail Price Index for The Bahamas—moderated by 0.3 of a percentage point to 1.4%. Average price declines were posted for food & non-alcoholic beverages (1.1%), communication (0.3%) and furnishing, household equipment & maintenance (0.1%), and lower average rates of growth, ranging between 1.0 and 1.5 percentage points occurred for education, miscellaneous goods & services, and restaurant & hotels. Inflation slowed for both recreation & culture and clothing & footwear, by under 1.0 percentage point to 0.6% and 0.5%, respectively, whereas average prices firmed for housing, water, gas, electricity & other fuels—the most highly weighted component in the index—to 2.8%, to reverse the year-earlier 0.3% contraction. Further, accelerated average price gains were recorded for medical care & health (2.8%), transport (2.8%) and alcohol/tobacco & narcotics (2.0%).

Amid the firming in international oil prices, the average fuel surcharge on electricity bills rose in March by 21.6% to 22.52 cents per kilowatt hour, almost double the previous year’s value. Average prices of gasoline and diesel also firmed by 4.2% and 4.8% to $4.94 per gallon and $4.61 per gallon respectively; while, year-on-year, the respective costs of both products advanced by 28.4% and 15.2%.

Preliminary data on Government’s budgetary operations through the nine months of FY2010/11 showed a narrowing in the overall deficit, by $63.9 million (25.2%) to $189.9 million. Total receipts rose by 8.1% ($77.2 million) to $1,028.1 million, as tax receipts advanced by 18.9% ($149.0 million), buoyed by a nearly two-fold rise in non-trade stamp taxes to $202.4 million, linked to the sale of a business entity. Some offset occurred from the decline in non-tax earnings, by 43.9% ($71.8 million), due to a 77.5% ($76.5 million) fall-off in income from “miscellaneous sources” to trend levels, following an extraordinary inflow in the prior period. Total outlays rose by 1.1% ($13.3 million) to $1,218.0 million, owing primarily to a 3.4% ($34.3 million) increase in current expenditure, resulting mainly from an 18.5% ($33.0 million) hike in purchases of goods and services. Capital spending also rose by 14.3% ($16.3 million), buoyed by an almost three-fold ($14.5 million) increase in asset acquisitions—mainly land purchases—combined with a 2.8% ($3.0 million) rise in spending for infrastructural projects. In contrast, net lending contracted by 50.0% to $37.3 million.

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