Monthly Economic and Financial Developments October 2014

Published: Wednesday December 3rd, 2014

Preliminary evidence suggests that the domestic economy maintained a mildly positive growth momentum during the month of October, reflecting modest gains in the high value-added stopover segment of the tourism sector and stable contributions to construction output from foreign investment activities. In other real sector developments, consumer price inflation for the twelve months to October trended upwards, notwithstanding a decline in the energy component, and there was no significant change in employment conditions. The fiscal situation featured a widening in the overall deficit during the first two months of FY2014/15, based on increased current outlays and a marginal fall-off in revenue receipts. On the monetary side, both bank liquidity and external reserves contracted, amid the seasonal increase in foreign currency demand to facilitate current payments.

Initial reports suggest that tourism output improved in October, as hotels reported higher occupancy levels over the prior year. Data from the Bahamas Hotel Association and Ministry of Tourism, covering a sample of twelve (12) major hotel properties on New Providence, showed an 8.9 percentage point gain in the average occupancy rate, to 52.9%. There was a modest reduction in room inventory, due to the closure of one hotel property for renovations, while the average daily room rate firmed by 4.1% ($6.53) to $167.58 per night. Together, these developments supported a 22.0% improvement in room revenue in October, relative to the same period last year.

For the year to October, the Retail Price Index for All Bahamas firmed by 0.9 of a percentage point to 1.3%, led by an acceleration in average price gains for alcohol beverages, tobacco & narcotics, to 7.6% from 2.7% in the comparable 2013 period. In addition, recreation & culture and communication costs advanced by 4.0% and 0.6%, a turnaround from respective declines of 0.7% and 3.5% a year earlier. Average prices also rose for transportation (3.8 percentage points to 4.0%), miscellaneous goods & services (1.9 percentage points to 2.3%) and food & non-alcoholic beverages (1.0 percentage point to 1.8%). More moderate cost increases, of less than 1.0 percentage point, were recorded for medical care & health, education, and furnishing, household equipment & routine household maintenance. Some offsets were provided by the easing in inflation for restaurant & hotels, to 2.2% from 3.2%, and the decline in average prices for clothing & footwear and housing, water, gas, electricity & other fuels—the most heavily weighted item on the index—by 0.8% and 0.6%, a reversal from respective gains of 0.8% and 0.1% in 2013.

The central Government’s overall deficit for the first two months of FY2014/15 nearly doubled, by $43.4 million to $87.4 million. This reflected a timing-related increase in aggregate expenditure, of $38.9 million (14.9%) to $299.6 million, coupled with a marginal falloff in total revenue of $4.5 million (2.1%) to $212.3 million. Tax collections contracted by $10.4 million (5.3%) to $185.8 million, explained by a $9.5 million (9.5%) decrease in non-trade related taxes, as other “non-allocated” and property taxes fell, by $8.9 million (34.9%) and $7.8 million (52.1%), respectively. In a modest offset, non-tax revenue grew by $2.9 million (14.1%) to $23.5 million, due mainly to a $2.0 million (10.6%) gain in fines, forfeits & administrative fees. In terms of spending, current outlays rose by $24.4 million (10.4%) to $260.3 million, as higher interest obligations boosted transfers, by $23.5 million (24.1%) to $121.0 million. Capital spending was up, by $10.0 million (46.8%) to $31.3 million, associated with a $5.7 million (29.9%) expansion in infrastructure-related outlays and an almost three-fold timing-related rise in asset acquisitions, to $6.6 million. Government also increased its support to public entities, by $4.5 million to $8.1 million.

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