Monthly Economic and Financial Developments (MEFD) January 2022
Published: Monday February 28th, 2022
Domestic Economic Developments
Preliminary indications are that the domestic economy maintained its growth trajectory during the month of January, although continuing to be impacted by the ongoing Novel Coronavirus (COVID-19) pandemic. Tourism sector output further recovered, undergirded by sustained gains in the high value-added air segment and the modest uptick in sea traffic, as vaccination efforts progressed. On the fiscal front, the overall deficit narrowed considerably during the first six months of FY2021/22, reflective of rebounded revenue collections, and a marginal decline in aggregate expenditure. Monetary developments featured an expansion in bank liquidity, despite the rise in the deposit base trailing the expansion in domestic credit. However, external reserves decreased during the review month, reflective of increased net foreign currency outflows through the public sector.
Tourism metrics for the month of January indicated that the sector’s output maintained its recovery momentum, notwithstanding the ongoing spread of the COVID-19 pandemic.
The latest available data from the Ministry of Tourism (MOT) showed that total visitor arrivals by first port of entry expanded to 500,718 in December, from a mere 33,681 in the corresponding period of 2020, when international borders reopened with restrictions. Underlying this outturn, air arrivals rose to 118,501, from 30,009 in the previous year—representing 84.6% of the air visitors recorded in 2019. In addition, sea traffic recovered to 382,217, relative to a volume of just 3,672 in the prior year.
A breakdown by major ports of entry revealed that total arrivals to New Providence advanced to 231,139 from 18,525 a year earlier. Contributing to this development, the sea and air segments measured 91,532 and 139,607, respectively. Foreign arrivals to Grand Bahama increased to 12,355, extending the volume of a mere 1,573 registered a year earlier, as air and sea arrivals amounted to 2,303 and 10,052, respectively. Further, traffic to the Family Islands strengthened to 257,224, from 13,583 in the prior year, supported by improvements in the air and sea components to 24,666 and 232,558, respectively.
On an annual basis, total arrivals rebounded by 17.1% in 2021, a reversal from a 75.2% reduction in 2020. Underlying this outturn, air arrivals rebounded sharply by 111.9%, following a 74.8% contraction in 2020, as all major markets registered gains during the review year. Further, the decrease in sea traffic moderated to 11.8% from a 75.4% falloff in 2020.
Further cementing trends, data provided by the Nassau Airport Development Company Limited (NAD) revealed that total departures—net of domestic passengers—rose to 77,171 in January, from 23,099 in the corresponding month of 2021. In particular, U.S. departures increased to 65,200 from 20,190 in the prior year, while non-U.S. departures firmed to 11,971 from 2,909 a year earlier.
In the vacation rental market, data provided by AirDNA for the month of January indicated steady gains in the demand for short-term rentals. Specifically, during the review month, total room nights sold rose more than two-fold to 113,559 from 41,064 in the corresponding 2021 period. Reflective of this outcome, occupancy rates for both entire place and hotel comparable listings firmed to 50.8% and 47.9%, respectively, from 29.1% and 30.5% in the comparative COVID-19 constrained period last year. Price indicators showed that year-over-year, the average daily rate (ADR) for hotel comparable listings moved higher by 17.2% to $177.75 and for entire place listings, by 14.5% to $483.07.
Provisional data on the Government’s budgetary operations for the first six months of FY2021/22 revealed a significant narrowing in the deficit to $269.0 million from $736.2 million in the comparable FY2020/21 period. The outturn reflected a $465.9 million (69.4%) uptick in total revenue to $1,137.3 million, combined with a $1.3 million (0.1%) decline in aggregate expenditure to $1,406.2 million.
The recovery in total revenue was led by a $402.7 million (70.7%) rise in tax revenue to $972.1 million. Specifically, taxes on goods and services rose by $265.4 million (60.3%), as VAT receipts more than doubled to $576.5 million from $286.4 million in the same period in FY2020/21, largely reflective of the measured pace of recovery in economic activity. Likewise, proceeds from gaming taxes advanced to $21.4 million from $11.0 million in the prior year. Taxes on the use or supply of goods and services also grew by $22.9 million (71.6%) to $55.0 million, underpinned by higher intake from business license ($27.2 million), motor vehicle taxes ($20.5 million) and marine licenses ($2.0 million). Further, receipts from international trade and transactions—inclusive of customs & other import duties, taxes on exports and departure taxes—increased more than two-fold to $225.8 million from $103.2 million a year earlier. In addition, property tax collections advanced by $11.8 million to $36.8 million and general stamp taxes, by $2.9 million to $4.2 million, relative to the prior year. Similarly, non-tax revenue grew by $63.0 million (61.8%) to $165.0 million, largely associated with a rise in proceeds from the sale of goods and services, by $45.8 million to $111.7 million and property income, by $32.6 million to $49.5 million.
The decrease in expenditure was mainly credited to a $9.1 million (8.3%) reduction in capital outlays to $100.2 million, explained by a $6.4 million (24.7%) decline in capital transfers to $19.5 million and to a lesser extent, a $2.8 million (3.3%) falloff in the acquisition of non-financial assets to $80.8 million. By contrast, recurrent spending grew by $7.8 million (0.6%) to $1,306.1 million, owing to a $56.6 million (30.9%) rise in interest payments to $239.8 million, compared to the same period in FY2020/2021, due to the elevated borrowings as a result of the COVID-19 pandemic. Further, personal emoluments and subsidies were higher by $13.7 million (4.0%) to $355.9. million and $5.7 million (2.6%) to $225.0 million, respectfully. Providing some offset, outlays for social benefits reduced by $41.5 million (23.5%) to $134.8 million, while disbursements for the use of goods and services fell by $21.2 million (7.9%) to $246.0 million.
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