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Monthly Economic and Financial Developments, March 2014

Published: Monday April 28th, 2014

During the review month, sustained contributions from foreign investment projects, alongside a modest firming in tourism output, supported a mildly positive economic outturn and relatively stable employment conditions. In addition, price developments showed a marginal increase in domestic energy costs over the review month. The fiscal situation showed an improvement in the overall deficit for the eight months of FY2013/14, primarily reflecting lower capital spending, while non-tax revenue also increased. Supported by net foreign currency inflows from real sector activities, both liquidity and external reserves reported gains over the review period.

The tourism sector posted growth over the first two months of the year, benefitting from steadily improving economic conditions in several source markets, and the impact of joint public/private sector incentive programmes. Initial information from the Ministry of Tourism showed growth in total arrivals advancing to 4.7%, for 1.1 million visitors, from 1.3% in 2013. The high value-added air segment rebounded by 2.9% from the year-earlier 4.7% reduction, while gains in sea traffic strengthened to 5.1% from 2.7%.

By major port of entry, arrivals to New Providence—which comprise the bulk of the total at 56.0%—firmed by 4.1% to 0.63 million, as the 5.7% gain in the sea component tempered the 0.8% drop in air arrivals. Visitors to the Family Islands also grew by 14.7%, owing to gains in both sea and air passengers, by 15.7% and 3.2%, respectively. In contrast, the Grand Bahama market remained weak, as the contraction in total arrivals accelerated to 19.3% from 6.5%, led by a 27.1% reduction in the dominant sea component, which eclipsed the 36.9% improvement in the smaller air segment.

The Government’s overall deficit narrowed by $92.3 million (26.3%) to $258.6 million over the eight months to February, of FY2013/14, reflecting the combined effect of a $69.2 million (5.6%) reduction in aggregate spending to $1,169.7 million and a $23.1 million (2.6%) increase in total receipts to $911.2 million. In terms of revenue, non-tax collections advanced by $34.8 million (34.9%) to $134.5 million, owing mainly to gains in fines, forfeits & administrative fees and income from “other sources”, of $22.6 million (35.6%) and $19.7 million (74.0%), respectively. In contrast, tax receipts narrowed by $11.7 million (1.5%) to $776.4 million, led by a $29.4 million (7.2%) falloff in taxes on international trade. In a partial offset, receipts from business and professional license fees rose by $17.9 million (32.4%), while ‘other’ miscellaneous taxes firmed marginally by $1.1 million (0.4%). The decrease in expenditure was attributed to a $59.5 million (37.0%) decline in capital spending to $101.2 million, as infrastructural outlays contracted by $47.7 million (35.7%), following the completion of several major projects and asset acquisitions fell by $3.2 million (18.8%). In some offset, current spending grew by $21.7 million (2.2%) to $1,026.1 million, as the $41.9 million (10.9%) expansion in transfer payments overshadowed the $20.2 million (3.3%) reduction in consumption outlays, associated with the reclassification of certain promotional incentives to other categories.

Financing for the deficit was sourced from both the external and domestic markets. Specifically, external borrowings totalled $423.8 million and included a US$300.0 million bond and $123.8 million in loans. A total of $370.0 million was raised domestically and comprised foreign currency loans ($125.0 million), bonds ($115.0 million), short-term advances ($79.0 million) and Treasury bills ($51.0 million).

In terms of domestic energy prices, in March, the monthly average cost of gasoline rose by 1.9% to $5.31 per gallon, and diesel prices firmed by 0.4% to $5.14 per gallon. However, in comparison to the prior year, the average prices of both fuels fell by 6.0% and 5.2%, respectively. Similarly, the Bahamas Electricity Corporation’s fuel charge increased by 1.5% to 23.78¢ per kilowatt hour (kWh) over the month, but was 10.2% lower when compared to the previous year.

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