Quarterly Economic Review June 2021
Published: Wednesday September 22nd, 2021
The Central Bank of The Bahamas is pleased to announce the release of its Quarterly Economic Review for the Second Quarter of 2021. The Review provides an examination of the domestic economic performance, as well as sectoral developments, principally during the period April to June.
Preliminary indications are that the domestic economy stabilized during the second quarter of 2021, despite the ongoing spread of the Novel Coronavirus (COVID-19) pandemic. Tourism output continues to gradually improve, supported by an ongoing strengthening in the high value-added air segment and the modest resumption in sea passengers, attributed to widespread vaccination efforts. In addition, several small to medium-scale foreign investment projects, along with continuous post-hurricane reconstruction works, provided stimulus to the construction sector. In price developments, inflation remained relatively benign over the review quarter, notwithstanding the uptick in global oil prices.
Provisional data showed that the Government’s overall deficit narrowed during the fourth quarter of FY2020/2021, relative to the same quarter for FY2019/2020. Underlying this outturn, aggregate revenue increased considerably, led by gains in value added taxes (VAT) receipts, which overshadowed the rise in aggregate expenditure. Budgetary financing was led by borrowings from external sources, and comprised of mostly policy-based loans.
In monetary developments, the expansion in the deposit base contrasted with the reduction in domestic credit during the review quarter. Consequently, both bank liquidity and external reserves grew, bolstered by Government’s external borrowing activities and a gradual recovery in net foreign currency inflows from real sector activities. In addition, on the short-term end of the arrears spectrum, banks’ credit quality indicators improved in the second quarter, while in latest available data for the first quarter of 2021, overall profitability levels increased, underpinned by a decline in provisions for bad debt and operating costs.
In the external sector, the estimated current account deficit narrowed over the review quarter, owing to a recovery in tourism earnings, which contributed to a switch in the service account position to a surplus from a deficit in the prior year, when globally imposed travel restrictions related to the COVID-19 pandemic eliminated travel receipts. In contrast, the estimated surplus on the capital account reduced considerably, while the financial account inflows moderated sharply, explained by a notable falloff in “other” investment liabilities, owing to a decrease in net currency and deposit liabilities.
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