Monthly Economic and Financial Developments, November 2014

Published: Tuesday December 23rd, 2014

Indications are that the domestic economy continued to grow at a moderate pace during the review month, sustained by improvements in tourism output, which benefitted from the hosting of a major sporting event, and construction activity linked to on-going foreign investment-funded projects. Inflationary pressures were contained, as sharply declining global oil prices translated into lower domestic energy costs. Fiscal developments featured a widening of the Government’s overall deficit during the first quarter of FY2014/15, as expenditure gains outpaced revenue growth. In the monetary sector, there was a modest contraction in external reserves, owing to the seasonal firming in domestic demand, while an increase in Central Bank financing to the Government augmented bank liquidity levels.

Anecdotal evidence suggests that tourism output strengthened over the review month, as both stopover visitor arrivals and hotel room revenue benefitted from the hosting of the ‘Battle 4 Atlantis’ basketball tournament on Paradise Island during the peak Thanksgiving holiday period. Reports indicate that the host property recorded full occupancy levels in late November, while other hotels also experienced high levels of visitor traffic. In addition, activity in the cruise industry was supported by the arrival of a large 4,905 passenger liner, which made its inaugural call on Nassau during the review period.

Reflecting the pass-through effects of the sharp fall in global oil prices over the second half of the year, the Bahamas Electricity Corporation’s (BEC) fuel charge decreased by 3.6% in November over the previous month, to 26.71¢ per kilowatt hour (kWh). However, on a year-on-year basis, the fuel charge was still higher by 5.6%.

The fiscal deficit deteriorated over the first quarter of FY2014/15, by $54.1 million (55.9%) to $150.9 million, associated with a $65.3 million (16.3%) hike in aggregate expenditure, to $467.4 million, which outpaced an $11.2 million (3.7%) rise in total receipts to $316.5 million. Current outlays grew by $26.3 million (7.3%) to $387.0 million, the bulk of which was accounted for by transfer payments ($23.4 million or 15.4%), owing to broad-based gains in interest payments, subsidies and transfers to various entities. In addition, wages & salaries firmed by $11.1 million (7.4%); however, purchases of goods & services fell by $8.3 million (14.3%), due to a timing-related contraction in payments for contractual services. Capital expenditures almost doubled, to $60.3 million, as the acquisition of the new ships for the Defence Force explained a four-fold rise in asset acquisitions, to $18.4 million, and infrastructure-related spending was higher by $15.4 million (58.3%). Net lending to public corporations also grew by $9.0 million to $20.1 million. The expansion in revenue was led by a $6.8 million (2.5%) gain in tax receipts to $278.5 million, as taxes on international trade and business & professional fees advanced by $4.8 million each, and overshadowed declines in selective taxes on services ($1.0 million) and other “miscellaneous” taxes ($1.6 million). Non-tax receipts rose marginally, by $1.4 million (4.1%) to $34.9 million, linked to a $1.5 million (5.0%) gain in fines, forfeits & administrative fees, while capital revenue of $3.0 million was also obtained from the sale of a Government asset, versus a negligible amount in the prior period.

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