Monthly Economic and Financial Developments, May 2010

Published: Friday July 2nd, 2010

Preliminary evidence suggests that the domestic market continued to stabilise in May, aided by the ongoing, though still fragile, recovery in the global economy. Tourism output showed an improving trend, buoyed by gains in the key stopover segment of the market, while public sector projects provided some support for construction activity, which continued to be weighed down by sustained weakness in private sector investments. Foreign currency inflows, related to a business transaction, combined with weakness in private sector demand, supported moderate gains in both liquidity and external reserves over the review period. The fiscal situation, however, remained strained, with a widening in the overall deficit over the ten months of FY2009/10, as lower imports created a drag on tax receipts, and capital outlays for infrastructural works firmed.

Tourism performance data for the first quarter of 2010 showed a rebound in the key stopover segment of the market, benefitting from hoteliers’ discounts and other incentive measures, such as the free companion airfare programme. Anecdotal evidence suggests that the majority of the growth was attributed to the leisure segment of the market, as the convention and corporate segments remained relatively flat. Total visitor arrivals recovered by 9.2% to 1.4 million, from a 2.9% decline to 1.3 million in the corresponding period of 2009. Air arrivals, which fell by 19.0% to 0.3 million in 2009, recovered by 5.4%; while the growth in the sea component was extended to 10.5%, for 1.0 million visitors, from 4.3% a year ago. Disaggregated by port-of-entry, visitors to New Providence and Grand Bahama increased by 16.7% and 14.9%, respectively, buoyed by the introduction of new cruise ships and the return of a cruise operator. In contrast, tourists to the Family Islands fell by 4.8%, reflecting a shift in cruise lines away from that market as their first port of entry.

Government’s overall deficit for the ten (10) months of FY2009/10 expanded by 36.1% ($79.8 million) to $301.0 million, relative to the corresponding period of FY2008/09. Total expenditure firmed by 3.5% ($45.8 million) to $1,348.1 million, fuelled by a 20.1% rise in capital spending to $122.1 million––related to various infrastructure development programmes. Similarly, budgetary support to public corporations elevated net lending by 64.7% ($32.3 million) to $82.2 million; whereas current expenses moderated by 0.6% ($6.9 million) to $1,143.9 million. Revenue intake was 3.2% ($34.0 million) lower at $1,047.1 million. Respective declines in taxes on international trade (6.8%) and “other” stamp taxes (25.0%) caused tax receipts to fall by 6.8% ($63.4 million) to $872.6 million, while one-off receipts from the sale of a business entity boosted non-tax collections by 20.3% to $174.5 million.

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