Monthly Economic and Financial Developments, October 2004
Published: Monday November 29th, 2004
In October, the economy continued to recover from the setbacks of the September hurricanes, amid initial signs of re-insurance inflows and some seasonal rebound in tourism. While in comparison to October 2003, less demand stimulus originated from private sector credit, residential mortgages support was firmer. Otherwise, money and credit trends were dominated by non-bank subscriptions to the Government's $100 million Registered Stock issue, with the Government's net liabilities to banks consequently reduced, alongside a decline in the deposit base.
Cumulative indicators for the first 10 months of 2004 upheld evidence of strengthening output contributions from tourism and domestic construction expenditures. Despite lower September volumes, the latest available data reveal that growth in total visitor arrivals firmed to 12.3% in the first three quarters of the year, after a 2.6% uptrend in 2003. This reflected broad-base stopover expenditure gains, and significantly improved cruise passenger trends for Grand Bahama and New Providence. While a more stabilized deficit trend emerged during the first 11 months of the Fiscal Year through May, indications are that the revenue decline resulting from the September hurricanes increased the resulting shortfall for the first quarter of FY2004/05 to $49.2 million, from $19.6 million in the same period last year.
Stronger prospects for tourism and foreign investments continue to frame the economic outlook. In particular, the upbeat projections for the US remain supportive of tourism, despite fuel costs uncertainties and an expected gradual increase in official interest rates as the Federal Reserve counters inflation threats. Moreover, continued weakness in the US currency, in spite of the interest rate outlook, should maintain some lower cost advantages in The Bahamas' stopover tourism product in comparison to Europe and Asia. In addition to transitory stimulus from hurricane repairs, construction is favoured in the short-term from sustained residential mortgage lending and a resurgence of foreign investments in the hotel sector.