Monthly Economic and Financial Developments (MEFD) November 2023

Published: Wednesday December 27th, 2023

Domestic Economic Developments

Overview

Provisional data suggest that the domestic economy sustained its growth momentum during the month of November, although at a moderated pace, with economic indicators converging closer to their expected medium-term trajectory. Tourism output continued to register healthy growth, bolstered by strong gains in the high value-added air passengers and the sea component, amid persistent demand for travel in key source markets. With regard to prices, average consumer price inflation—as measured by changes in the average Retail Price Index (RPI) for The Bahamas—slowed during the latest twelve months to September 2023, as the rise in international oil prices tapered, relative to the same period last year. On the fiscal front, the deficit narrowed in FY2022/23 vis-à-vis FY2021/22, on account of an expansion in aggregate revenue, which outpaced the rise in total spending. Monetary sector developments featured a buildup in banking sector liquidity during the review month, as the expansion in the deposit base exceeded the growth in domestic credit. However, external reserves declined in November, reflective of net foreign currency outflows through the private sector, which offset net public sector inflows.

Real Sector

Tourism

Initial data revealed that the tourism sector continued to register healthy growth during the review month, bolstered by ongoing gains in both the high-value air segment and the sea component, as the demand for travel in key source markets persisted.

The most recent data provided by the Nassau Airport Development Company Limited (NAD) indicated that total departures in November—net of domestic passengers—rose by 11.3% to 0.12 million, relative to the same period last year. Specifically, U.S. departures expanded by 12.1% to 0.10 million, while non-U.S departures grew by 7.1% to 0.02 million, vis-à-vis the previous year. On a year-to-date basis, total outbound traffic advanced by 23.9% to approximately 1.5 million passengers. In particular, U.S. departures increased by 24.1% to 1.3 million visitors, compared to the same period in 2022. Likewise, non-U.S. departures rose by 22.7% to 0.2 million visitors, relative to the comparative period last year.

As it relates to the short-term vacation rental market, the latest data provided by AirDNA showed that in November, total room nights sold declined to 118,203 from 119,105 in the corresponding 2022 period. Contributing to this outturn, the occupancy rates for both entire place and hotel comparable listings fell to 46.2% and 47.2%, respectively, vis-à-vis 50.3% and 48.3% in the prior year. Likewise, as depicted in Graph 1, price indicators revealed that year-over-year, the average daily room rate (ADR) for entire place listings decreased by 4.3% to $527.87 and for hotel comparable listings, by 0.2% to $190.63.

Fiscal

Preliminary data on the Government’s budgetary operations for FY2022/23 revealed that the deficit narrowed to $533.4 million from $717.4 million in FY2021/22. Underlying this outturn, total revenue grew by $246.5 million (9.4%) to $2,855.8 million, outpacing the $62.5 million (1.9%) rise in aggregate expenditure to $3,389.2 million.

The growth in revenue collections was led by a $312.0 million (14.4%) increase in tax receipts. Specifically, taxes on goods and services rose by $137.2 million (9.2%) to $1,629.5 million, as VAT receipts expanded by $116.2 million (10.2%), to $1,252.0 million, underpinned by the ongoing strengthening in economic activity. Likewise, proceeds from financial & realty stamp taxes increased by $24.0 million (28.9%), to $107.0 million. In addition, revenue from gaming taxes advanced to $63.9 million from $51.3 million in the prior year. Further, receipts from international trade and transactions—inclusive of exports, customs & other import duties and departure taxes—expanded by $163.7 million (32.0%) to $675.4 million, relative to the prior fiscal year. In addition, property tax collections rose by $14.5 million (9.9%) to $161.5 million, while general stamp taxes reduced by $3.4 million (30.6%) to $7.7 million. In contrast, non-tax revenue decreased by $66.4 million (14.9%) to $380.4 million, as property income fell by $18.2 million (22.0%) to $64.6 million, while proceeds from the sale of goods and services declined by $14.0 million (6.2%) to $211.0 million.

As it relates to expenditure, recurrent spending grew by $18.9 million (0.6%) to $3,061.8 million. The outturn was explained by a rise in employee compensation, by $68.0 million (9.2%) to $805.2 million, while interest payments rose by $21.3 million (3.9%) to $573.1 million. Further, payments for the use of goods and services increased by $32.7 million (5.1%) to $671.7 million. In contrast, other “miscellaneous” payments were lower by $11.9 million (3.7%) at $312.7 million, owing mainly to a falloff in insurance premium payments. Likewise, subsidies reduced by $31.2 million (6.3%) to $464.7 million, attributed to lower outlays to public non-financial corporations. Similarly, outlays for social benefits fell by $67.6 million (56.1%) to $52.8 million. Capital outlays also expanded by $43.6 million (15.4%) to $327.4 million, as spending for the acquisition of non-financial assets advanced by $57.0 million (25.3%) to $282.0 million. Contrastingly, capital transfers decreased by $13.4 million (22.8%) to $45.5 million.

Prices

Average domestic consumer price inflation—as measured by the All Bahamas Retail Price Index—slowed to 4.1% during the twelve months to September, from 5.1% in the comparative 2022 period, as the rise in global oil prices moderated, vis-à-vis the same period last year. Specifically, the average price for communication declined by 0.1%, after posting a 10.5% increase last year. Further, the rise in the average cost of transport decreased notably to 0.1% from 15.0% in the prior year. Likewise, average inflation slowed for food & non-alcoholic beverages (8.8%); restaurants and hotels (6.6%); clothing & footwear (2.6%); and education (1.4%). Providing some offset, average inflation quickened for recreation & culture (12.7%); alcohol beverages, tobacco & narcotics (7.9%); health (6.0%); housing, water, gas, electricity & other fuels (5.0%); and furnishing, household equipment & routine household maintenance (4.1%). In addition, average prices for miscellaneous goods & services firmed to 2.1%, following a 1.1% decline in 2022.

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