Monthly Economic and Finanical Developments, March 2012

Published: Wednesday May 2nd, 2012

Indications are that the domestic economy continued to exhibit modest growth during March, benefitting from steady gains in tourism output and foreign-investment led construction activity. Inflation sustained its upward trajectory from relatively low year-earlier levels, reflecting the pass-through effects of higher international oil prices. In the fiscal sector, the overall deficit widened for the eight months to February of FY2011/12, as the increase in aggregate expenditure overshadowed the rise in total revenue. Money and credit developments featured a build-up in bank liquidity for March, associated with increased lending to the Government, while payments for goods and services explained the contraction in external reserves.

Preliminary tourism sector data for the first quarter showed total visitors rising by 10.8%, buoyed by gains in both the air and sea components, of 11.2% and 10.7%, respectively. The largest improvement was posted in the Family Island market, where total arrivals firmed by 12.4%, on account of a double digit increase in sea passengers (13.4%), combined with gains in air traffic (3.3%). A more muted rise was noted for the Grand Bahama market of 3.6%, benefitting largely from the 21.9% hike in air arrivals, alongside a marginal 1.0% uptick in the sea segment. The 11.7% expansion in the New Providence market reflected similar gains in both the air and sea components by 11.6% and 11.8%, respectively.

Hotel performance indicators, based on a sample of large hotels in New Providence and Paradise Island, showed an improvement in property earnings in both March and the first quarter, supported by the resumption in service of a major carrier from a key market, the ongoing recovery in group business and the hosting of an international tennis tournament. Reflecting these developments, total room revenue rose by 8.0% in March, owing to a 4.2 percentage point firming in the average occupancy rate to 84.3% and a 3.1% increase in the average daily room rate to $283.35. Similarly, total receipts were 9.1% higher over the first three months of the year, buoyed by a 0.8% gain in the average daily room rate to $254.77 and an improvement in the average occupancy rate, to 71.2% from 66.6%.

Domestic price developments generally reflected the firming bias in global crude oil prices. For the month of March, the average cost of gasoline advanced by 5.3% to $5.33 per gallon and for diesel, by 4.3% to $5.22 per gallon. However, annual comparisons showed the average cost per gallon of gasoline and diesel sharply higher by 13.2% and 16.5%, respectively. The Bahamas Electricity Corporation’s fuel charge also increased, by 15.5% on an annual basis, although unchanged at 26.00 cents per kilowatt hour (kWh) when compared to February’s rate.

The fiscal deficit widened by an estimated $45.2 million (27.6%) to $209.0 million over the eight months of FY2011/12. Aggregate expenditure grew by $97.8 million (9.2%) to $1,164.4 million, outpacing the $52.5 million (5.8%) advance in total revenue to $955.4 million.

Based on preliminary fiscal data for the three-months to February, 2012—the latest month available—the overall position reversed to a deficit of $58.1 million from a surplus of $29.0 million in the same period of FY2010/11. In particular, spending surged by $117.5 million (28.8%) to $524.9 million, to outpace a $30.4 million (7.0%) increase in revenues to $436.4 million. The expenditure outturn was primarily explained by an almost eight-fold hike in net lending to public corporations, to $102.0 million, combined with a $40.0 million increase in capital expenditure, which was linked to the purchase of a new Government building and higher infrastructure spending. However, current outlays fell marginally by $3.2 million (0.9%). Revenue gains included a $12.3 million (52.1%) timing-related increase in non-tax collections, as well as the receipt of $17.7 million in funds related to the sale of a property, while tax receipts steadied at $413.3 million. Financing for the deficit over the three-month period consisted of $12.4 million in foreign currency loans and $4.5 million in short-term advances. At end-March, the Direct Charge on the Government stood at approximately $3.86 billion, a gain of 1.3% from end-December 2011.

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