Monthly Economic and Financial Developments, September 2012

Published: Friday November 9th, 2012

Preliminary data suggests a continuation of the economy’s mildly positive growth momentum during September, supported largely by tourism sector output, alongside foreign investment and public sector related construction activity. However, as growth remained narrowly based, high unemployment persisted. Indications are that inflation was subdued, reflecting a softening in energy costs over the review period. Fiscal data for the first two months of FY 2012/13 showed that the overall deficit widened, due to higher expenditure. In monetary developments, bank liquidity remained substantially unchanged while external reserves contracted, owing to the traditional firming in demand in the latter half of the year, and increased fuel payments.

Initial data suggests that the gains in tourism output recorded over the first half of the year were sustained during the third quarter, in comparison to a year earlier when adverse weather conditions in August led to reduced arrivals. Information from a sample of hotels in New Providence and Paradise Island showed total room revenue firming by 1.6% over the three-month period, buoyed by a gain in average occupancy rates of 5.0 percentage points to 68.9%, which negated a contraction in the average daily room rate (ADR) of 6.3% to $205.6. Similar improvements were noted year-to-date, as average occupancy levels remained above 2011’s levels, resulting in higher room revenues, but the ADR was substantially lower. In addition, hotel earnings still have not fully returned to their pre-recession levels.

Domestic energy price developments were mixed in September, as diesel and gasoline costs both moved higher by 10.1% to $5.36 and $5.79 per gallon, respectively, and in comparison to the same period a year earlier, both costs were 7.6% and 7.8% higher. In contrast, the Bahamas Electricity Corporation’s fuel charge fell by 5.3% to 26.0¢ per kilowatt hour (kWh) over the month and remained in line with the previous year’s level.

Preliminary data on the Government’s budgetary operations for the first two months of FY2012/13 showed that the overall deficit widened by $27.0 million (49.5%) to $81.6 million, as aggregate expenditure expanded by $43.0 million (17.7%) to $285.8 million, eclipsing the $16.0 million (8.5%) growth in total revenue to $204.3 million. In terms of receipts, tax collections firmed by $16.7 million (9.7%) to $189.5 million, led by gains in international trade taxes of $11.6 million (12.5%). Conversely, non-tax revenues fell marginally by $0.8 million (4.9%) to $14.8 million. Under outlays, capital expenditure more than doubled to $39.1 million, underpinned by a two-fold hike in infrastructure spending to $35.5 million and a slight $1.9 million rise in asset acquisitions. Current expenditure also advanced by $19.2 million (8.7%) to $240.9 million, associated mainly with a $9.6 million (10.2%) uptick in wages and salaries and an $8.4 million (10.2%) advance in transfer payments.

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