Quarterly Economic Review March 2025
Published: Monday June 16th, 2025
The Central Bank of The Bahamas is pleased to announce the release of its Quarterly Economic Review for the First Quarter of 2025. The Review provides an examination of the domestic economic performance, as well as sectoral developments, principally during the period January to March.
Preliminary indications are that during the first quarter of 2025, the Bahamian economy sustained its positive expansion, but at a slower pace than in 2024, with economic indicators reverting closer to their expected medium-term potential. In particular, gains in tourism earnings though buoyed by robustness in the sea segment, were limited by constrained capacity in the high value-added air component. Nevertheless, several foreign investment projects, including developments in private cruise destinations, provided sustained stimulus to the construction sector. In price developments, domestic inflation moderated, reflecting the pass-through effects of lower global oil prices on imported oil and other goods.
Provisional data indicated that for the third quarter of FY2024/25, the Government’s budgetary surplus increased considerably, vis-à-vis the comparable quarter of FY2023/24. The outturn was largely due to a VAT-led expansion in total revenue, combined with a decline in aggregate expenditure. Budgetary financing was sourced mainly from the domestic market and consisted of a mix of long and short-term debt instruments.
On the monetary front, bank liquidity contracted, despite the growth in the deposit base outpacing the rise in domestic credit. Moreover, the accumulation in the financial system’s net foreign assets moderated, relative to the prior year, which had included robust foreign currency inflows from real sector activities and proceeds from Government’s external borrowings. Meanwhile, buoyed by the continued improvement in economic activity, banks’ credit quality indicators strengthened over the review period. In addition, banks’ profitability indicators improved over the fourth quarter of 2024—the latest period for which data was available—underpinned by reduced provisions for bad debts, and higher interest income. Meanwhile, the weighted average interest rate spread narrowed during the review quarter, as the weighted average loan rate decreased, while the mean deposit rate increased.
In external sector developments, the estimated current account deficit narrowed during the review quarter, owing to an expansion in the services account surplus—which reflected healthy gains in travel receipts—and a decline in the primary income account deficit. These overshadowed the widening in the merchandise trade deficit. Similarly, the financial account inflows, excluding reserve assets, expanded, bolstered by inflows from other investments activities, combined with a rise in portfolio investment.
The report also features a review of financial services activity in 2024 and its contribution to the overall economy. The results of the survey showed that among domestic institutions, faster balance sheet expansion was recorded, linked to the healthier environment for private sector credit. In the international sector, the balance sheet was slightly expanded, with a similar trend in fiduciary assets. However, employment within the banking sector decrease, as Bahamian positions reduced. Meanwhile, expenditure grew reflective of an increase in operational costs. For domestic credit unions, both intermediation and expenditure outlays rose, with gains in balance sheet assets, while the securities industry net asset value reduced. Domestic insurance activity remained relatively subdued during the review year, recording modest growth in assets.
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