Monthly Economic and Financial Developments, October 2009

Published: Thursday December 3rd, 2009

Despite signs of a modest pickup in the pace of the global recovery, domestic economic conditions remained relatively subdued during October, reflecting anemic consumer spending and sustained weakness in tourism output and foreign investment led construction activity. However, indications are that the softening in domestic prices, noted since the latter half of 2008, was sustained during the period. On the fiscal side, Government’s deficit expanded during the first three months of FY2009/10, as sluggish private sector demand adversely impacted revenue collections, amid a marginal decline in total expenditure. In monetary developments, the seasonal, although more constrained, rise in foreign currency demand resulted in a contraction in both liquidity and external reserves.

Tourism activity for the nine month period showed cruise-led 5.5% gains in overall arrivals to 3.3 million, reversing last year’s 6.1% decrease. However, preliminary indications are that real output contracted, based on the sustained weakening in the higher value added stopover segment of the market, as evidenced by the 12.8% decline in air traffic. Disaggregated by ports of entry, visitors to New Providence grew by 7.4%, with the 19.2% expansion in sea arrivals offsetting the 8.2% reduction in air passengers. Similarly, Family Island tourists rose by 4.4%, associated with a 10.7% advance in the dominant sea segment, which negated a 23.4% falloff in air arrivals. In contrast, an 11.6% gain in sea arrivals was broadly countered by a 27.0% downturn in the air segment, resulting in visitors to the Grand Bahama market declining marginally by 0.4%.

Government’s fiscal position deteriorated further during the first quarter of FY2009/10, as the deficit widened by 67.1% ($40.6 million) to $101.0 million, over the previous period. Total revenue contracted by 14.8% to $267.8 million, owing to a 15.7% decline in tax receipts, which was broad-based among the categories. Occasioned by lower collections from fines, forfeitures and administrative fees, non-tax revenues also fell by 4.8%. Aggregate expenditure was 1.6% lower at $368.7 million, due to a 3.5% reduction in current outlays linked to reduced consumption spending and transfer payments. Conversely, infrastructure investments boosted capital spending by 31.5% to $37.5 million.

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