Quarterly Economic Review December 2021
Published: Monday March 21st, 2022
The Central Bank of The Bahamas is pleased to announce the release of its Quarterly Economic Review for the fourth quarter of 2021. The Review provides an examination of the performance of the domestic economy, as well as sectoral developments, principally during the period October to December.
The domestic economy’s gradual pace of recovery was sustained during the fourth quarter of 2021, despite the ongoing spreading the Novel Coronavirus (COVID-19) and its new variants. Tourism output further strengthened, largely supported by ongoing gains in the high value-added air segment and modest improvement in sea traffic. In addition, a number of small to medium-scale foreign investment projects, and to a lesser extent post-hurricane reconstruction work, provided stimulus to the construction sector. Meanwhile, domestic inflation accelerated on an annual basis, due to the pass-through from rising costs in imported goods, including oil prices.
Provisional data showed that the Government’s overall deficit reduced considerably during the second quarter of FY2021/22, relative to the same period of FY2020/21. Contributing to this outturn, was a notable increase in total revenue collections, led by a rebound in value added tax (VAT) receipts, combined with some decrease in aggregate expenditure. Budgetary financing was mainly obtained from domestic sources and included a combination of long and short-term debt.
On the monetary front, growth in domestic credit contrasted with decline in the deposit base during the fourth quarter. As a result, both bank liquidity and external reserves contracted. Further, banks’ credit quality indicators weakened during the review quarter, attributed to a rise in non-performing loans, which outstripped the reduction in short-term arrears. However, the latest available data for the third quarter revealed a strong rebound in banks’ overall profitability, reflecting reduced levels of provisioning for bad debt, along with gains in interest and commission & foreign exchange income.
In the external sector, the estimated current account deficit narrowed over the review quarter, owing to a recovery in tourism earnings, which led to a shift in the services account position to a surplus from a deficit in the previous year. Meanwhile, the financial account inflows decreased considerably, largely reflecting a reversal in the portfolio investment position to a net outflow from a net receipt in the prior year, which had included debt-financed inflows to the Government. Estimated capital account transfers were nil during the fourth quarter, relative to inflows the prior year, which had included residual hurricane re-insurance inflows.
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