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Monthly Economic and Financial Develpoments, December 2013

Published: Thursday January 30th, 2014

Preliminary indications are that domestic economic conditions were mildly positive in December, supported by ongoing foreign investment projects and a slightly improved tourism outcome. Consumer price inflation remained relatively benign, although there was moderate firming in domestic energy prices. The fiscal situation improved, as the Government’s overall deficit contracted for the five months through November of FY2013/14, owing to a decline in spending and a slight increase in revenue. Monetary sector developments featured a build-up in external reserves, due to Government’s foreign currency borrowings, while there was a mild seasonal decline in bank liquidity and credit quality indicators deteriorated.

Provisional hotel performance data, obtained from a sample of large hotels in New Providence and Paradise Island, showed a marginal uptick in room revenue, by 0.4% in December, year-on-year, on account of a 2.3% rise in the average daily room rate (ADR) to $280.87, and a 0.8 percentage point increase in the average hotel occupancy rate to 58.8%. This represented the second monthly gain in room revenues for the year, and occurred, despite the reduction in inventory at seven properties and the temporary closure of one hotel. Developments throughout 2013 were influenced by sustained weakness in several of the main source markets, modest reductions in airlift and room capacity and ongoing regional competition. As a consequence, total room revenue declined by 7.0% over the previous year, as the 5.1 percentage point reduction in the occupancy rate, to 63.2%, outpaced the 2.9% firming in the ADR to $235.87.

Domestic energy price movements for the month of December were mixed, with the average cost of gasoline stabilizing at $5.12 per gallon, while the average price of diesel rose by 6.4% to $5.32 per gallon. On an annual basis, both gasoline and diesel prices rose, by 0.4% and 3.1%, respectively.

Government’s deficit for the five months to November of FY2013/14 narrowed by $23.4 million (10.4%) to $201.3 million, reflecting the combined effect of a $17.4 million (2.4%) decline in aggregate expenditure to $716.3 million, and a modest $6.0 million (1.2%) rise in total revenue to $515.0 million. With regard to receipts, non-tax collections grew by $8.3 million (13.5%) to $70.0 million, owing primarily to a $17.7 million (51.7%) upturn in fines, forfeits & administrative fees, which negated the $8.5 million (32.1%) contraction in property income flows. In contrast, tax receipts fell marginally by $2.5 million (0.6%) to $444.9 million, as weak consumer demand led to a $21.0 million (8.2%) reduction in taxes on international trade, to outstrip the $15.8 million (10.0%) gain in other “miscellaneous” taxes and broad-based rate-related increases in business and professional fees of $4.1 million (23.9%). The improved expenditure outcome was due solely to the contraction in capital outlays, by $28.3 million (33.3%) to $56.7 million, as several major infrastructure projects were completed. Conversely, recurrent spending grew by $7.1 million (1.1%) to $634.4 million, as higher interest payments and subsidies led to a $27.5 million (11.1%) gain in transfer payments, which offset the $20.5 million (5.4%) decline in consumption outlays, that was partly linked to lower spending on contractual services. Financing for the deficit comprised Government bonds ($115.0 million), external borrowings ($104.9 million) and a short-term internal foreign currency loan ($50.0 million).

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