Monthly Economic and Financial Developments, March 2013

Published: Saturday May 4th, 2013

Indications are that domestic economic conditions were somewhat flat during the review month, as softness in tourism output occurred, alongside stable foreign investment-led construction activity. In other real sector developments, domestic energy costs increased modestly over the review month, influenced by the elevated global oil price levels. The fiscal outcome featured the combination of higher spending and lower revenue collections, which caused a further deterioration in the overall deficit over the eight months of FY2012/13. In the monetary sector, net inflows of foreign currency from real sector activities supported gains in both bank liquidity and external reserves over the review period.

Preliminary data from the Ministry of Tourism showed growth in tourist arrivals of 3.3% during the first quarter, to 1.75 million, down from the 10.4% advance reported a year ago. Sea visitors rose by 5.0%; however, the high value-added air segment fell by 3.4%. In terms of the major markets, visitors to New Providence increased by 9.8%, as growth in sea passengers of 15.6% outpaced a 3.7% contraction in air tourists. The arrivals count to Grand Bahama decreased by 5.8%, owing to reductions in both the air and sea components, by 19.1% and 3.6%, respectively. Similarly, visitors to the Family Islands decreased by 3.8%, with the 5.0% falloff in the dominant sea segment, countering the 8.4% gain in air passengers.

In energy price developments, the average prices for both gasoline and diesel rose by 5.8% and 4.0% over the month, and by 1.1% and 0.9% on an annual basis, to $5.65 and $5.42 per gallon, respectively. Similarly, the Bahamas Electricity Corporation’s fuel charge firmed by 4.5% month-on-month to 26.47¢ per kilowatt hour (kWh), and by 1.8% over the previous year.

Based on preliminary data for the Government’s budgetary operations over the eight months of FY2012/13, the overall deficit worsened by $141.8 million (68.0%) to $350.5 million at end-February 2013. This outturn reflected a $67.4 million (7.1%) decline in total receipts to $888.0 million (57.8% of budget estimates), coupled with a $74.5 million (6.4%) gain in aggregate expenditure to $1,238.5 million (59.5% of budget projections). In terms of revenue, the contraction resulted mainly from a $54.8 million (6.5%) reduction in tax collections to $788.2 million, attributed to a $92.2 million (18.5%) falloff in taxes on international trade, as excise taxes returned to trend levels after a significant one-time inflow in the preceding year. In a partial offset, other "miscellaneous" taxes firmed by $32.4 million (12.0%), as the repayment of arrears resulted in departure tax receipts expanding by $38.1 million (62.5%). Growth in non-tax collections, of $5.1 million (5.4%) to $99.7 million, was explained by a timing-related hike of $6.7 million in airport landing fees from negligible levels in the prior period and a $4.5 million expansion in fines, forfeits and administrative fees, which outweighed a $7.1 million reduction in income from other “miscellaneous” sources.

Spending growth was fuelled by a $44.6 million (4.6%) increase in current outlays to $1,004.0 million. In particular, transfer payments grew by $24.9 million (6.9%), and were dominated by flows to the health sector. Consumption outlays also rose by $19.7 million (3.3%), on account of higher salary ($17.5 million) and purchases of goods & services ($2.2 million) payments. In addition, capital spending firmed by $33.3 million (26.1%) to $160.7 million, primarily earmarked for infrastructure projects. In contrast, net lending to public corporations decreased by $3.4 million (4.4%) to $73.8 million.

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