Monthly Economic and Financial Developments (MEFD) February 2021

Published: Monday March 29th, 2021

Domestic Economic Developments

Overview

During the month of February, domestic economic developments continued to be driven by the Novel Coronavirus (COVID-19). Travel restrictions imposed globally continued to impede tourism output, with the high value-added air component remaining depressed and the sea segment on pause. Nonetheless, foreign investment-led projects, combined with post hurricane reconstruction efforts, provided some stimulus to the construction sector. In price developments, the domestic inflation rate narrowed during the twelve months to January, explained by lower fuel costs. Monetary developments registered a reduction in bank liquidity, as the expansion in domestic credit, contrasted with the decline in the deposit base. Similarly, external reserves decreased, amid a falloff in foreign currency inflows from real sector activities.

Real Sector

Tourism

Tourism metrics for the month of January revealed that the sector’s output remained contracted, as globally imposed travel restrictions associated with COVID-19, resulted in air traffic recording historically low levels of visitors and sea arrivals largely eliminated. Nevertheless, domestic demand undergirded gains in the vacation rental market.

Official data provided by the Ministry of Tourism (MOT) showed that total foreign arrivals by first port of entry fell to 23,619 visitors during the month, markedly lower than the 687,200 arrivals in the same period last year. In particular, sea arrivals were virtually absent, relative to the 10.8% gain in 2020, while air arrivals reduced considerably by 83.4%, extending the 3.5% decline in the previous year.

A disaggregation by major islands, indicated that in New Providence total arrivals corresponded to a mere 3.8% of the 2020 volumes, reflective of decreases in both sea (99.7%) and air (88.0%) traffic. Further, arrivals to Grand Bahama were only 2.8% of the prior year’s outturn, as air arrivals reached 23.9% of the previous year’s level. Similarly, visitors to the Family Islands corrsponded to 3.1% of the previous year’s volumes.

Data from The Bahamas Hotel & Tourism Association (BHTA) and the Ministry of Tourism (MOT)—which covers a sample of large hotels in New Providence and Paradise Island—confirmed the deterioration in the hotel sector performance. Specifically, in January, estimated room revenue contracted by 90.4% from the previous year, as the occupancy rate settled at just 7.5% from 69.3% a year earlier, while the number of room nights sold reduced considerably by 92.4%. However, the average daily room rate (ADR) rose by 25.6% to $327.83.

With regard to the short-term rental market, data provided by AirDNA showed positive activity within the market throughout February, supported by domestic demand. Specifically, total room nights sold grew by 24.0%, compared to 9.9% in the prior year, while bookings for entire place listings and hotel comparable listings increased by 26.2% and by 8.0%, respectively. Pricing indicator outcomes for both entire place listings and hotel comparable listings revealed a rise in the average daily room rate (ADR) of 6.5% and 3.8%, to $449.49 and $157.53, respectively, contrasting with decreases of 2.0% and 4.1% in 2020.

The most recent data provided by the Nassau Airport Development Company Limited (NAD) showed that total departures—less domestic traffic—reduced to 16,098 in February, vis-à-vis a 7.5% increase during the same period in 2020. Underpinning this outturn, the dominant U.S. component fell by 86.9%, a reversal from the previous year’s 7.5% gain. Likewise, non-U.S. departures declined significantly by 95.3%, following a 7.6% growth a year earlier.

Prices

Attributed to the pass-through effects of the reduction in global oil prices, average consumer prices—as measured by the All Bahamas Retail Price Index—declined by 0.06% during the twelve months to January, a reversal from a 2.4% increase in 2020. Contributing to this outturn, average costs for communication decreased by 8.6%; for transport, by 4.9%; for recreation & culture, by 1.3% and for housing, water, gas, electricity & other fuels, by 0.6%, following gains in 2020. Further, average inflation rates moderated for restaurants & hotels (3.3%), furnishing, household equipment & maintenance (1.9%), alcohol beverages, tobacco & narcotics (2.7%) and health (3.9%). In addition, the average price for clothing & footwear was relatively flat, after registering a 0.5% increase in the prior year. Providing some offset, the average inflation rates quickened for miscellaneous goods and services (3.0%) and for food & non-alcoholic beverages (2.0%), while, average price reductions slowed for education (2.9%).

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