Monthly Economic and Financial Developments, November 2009

Published: Wednesday December 23rd, 2009

Although recent indicators point to a modest acceleration in the recovery of global output, preliminary data suggests that domestic economic activity remained weak during November, given the downturn in tourism performance, persistent sluggishness in foreign-investment led construction activity, and anaemic private sector demand. These trends continued to adversely impact the fiscal situation and dampen employment prospects. Monetary conditions featured robust gains in both liquidity and external reserves, arising from the Government’s receipt of the net proceeds from a US$300 million external bond issue. Domestic inflationary pressures remained comparatively soft over the review period, reflecting the pass-through effects of lower fuel prices.

Despite significant gains in the cruise segment of the market, initial data suggests that output in the tourism sector remained subdued in the third quarter, owing to contractions in the high value-added air component. In terms of arrivals, total visitors advanced by 12.5% to 1.0 million, improving on the 15.1% reduction in 2008, as the 23.5% expansion in sea passengers outweighed the 8.4% decrease in air tourists. By ports of entry, total visitors to New Providence rose by 10.5%, buoyed by a 22.3% gain in sea traffic which outpaced the 4.8% decline in air arrivals. Similarly, a 38.2% rise in sea visitors to the Family Islands offset the 14.9% downturn in the air segment, for an upturn of 27.7%. Conversely, the protracted weakness in the Grand Bahama market was evidenced by nearly a quarter contraction in air arrivals.

As international oil prices eased from their mid-2008 peak, inflation for the twelve months to November narrowed by 2.0 percentage points to 2.4%, in contrast to a 1.9 percentage point advance to 4.4% a year ago. Moderated average cost increases were posted for food & beverages (5.5%), ‘other’ goods & services (4.1%), furniture & household operations (3.5%) and medical care & health (2.3%). Conversely, price gains accelerated for education and clothing & footwear, to 3.2% and 1.8%, respectively. With regard to the cost of electricity, the average fuel surcharge for November fell by 2.2% on a monthly basis, to $12.24 per kilowatt hour (kWh), remaining 42.5% below the previous year’s rate. In contrast, average prices for diesel, which contracted by 9.0% last year, rose by 4.0% to $3.54 per gallon; whereas gasoline prices registered a consistent 4.0% average hike to $4.21 per gallon.

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