For a better view on Central Bank of The Bahamas, Update Your Browser.

Quarterly Economic Review - March 2019

Published: Friday August 9th, 2019

The Central Bank of The Bahamas is pleased to announce the release of its Quarterly Economic Review for the First Quarter of 2019. The Review provides an examination of the domestic economic performance, as well as sectoral developments, principally during the period January to March.

Preliminary data suggests that the domestic economy expanded modestly during the first quarter of 2019, reflecting the growth in tourism sector output, as the improvement in several key source markets, along with increased room capacity, supported gains in the high value-added air segment. In addition, a number of small to medium-scale foreign investment-related projects, undergirded activity in the construction sector. In price developments, domestic inflation remained relatively subdued, although the hike in the value added tax (VAT) rate in earlier periods and the recent increase in global oil prices, contributed to an uptick in the rate.

Government recorded a small surplus on its overall operations during the third quarter of FY2018/2019, in comparison to a deficit in the comparative quarter of FY2017/2018. Underlying this outturn was a VAT-led increase in total revenue, which outpaced the growth in aggregate expenditure. Budgetary funding was sourced mainly from the domestic market and was dominated by long-term debt.

In monetary developments, bank liquidity increased during the first quarter, as the foreign currency-led expansion in the deposit base, contrasted with the reduction in domestic credit. Similarly, the growth in external reserves accelerated, bolstered by net inflows from real sector activities. In addition, reflecting in part the improving economic conditions, along with entities' aggressive collection efforts, sustained debt restructuring measures and loan write-offs, domestic banks' credit quality indicators improved during the review quarter. However, the latest available data for the fourth quarter of 2018, showed a decline in overall profitability, occasioned by higher provisioning for bad debt.

On the external side, the estimated current account balance registered a small surplus during the first quarter, a turnaround from a deficit recorded in the same period last year, amid a notable decrease in the merchandise trade deficit, combined with a tourism-led gain in the services account surplus. In contrast, the surplus on the capital and financial account narrowed significantly, as the public sector recorded a net repayment, compared to a net receipt in the prior year, while foreign investment inflows contracted significantly.

The report also presents the findings of the Central Bank's 2016 and 2017 survey of private (sponsored) pension plans in The Bahamas. Preliminary data indicates that the total value of sponsored pension assets rose from $1.1 billion in 2015 to an estimated $1.2 billion in 2017. The largest concentration of labor force participants and hence accumulated pension fund assets, continued to be seen in employer-sponsored schemes in the tourism, financial services and communications & utilities sectors. In addition, the largest proportion of savings accumulated remained in public sector securities, followed by mutual funds, equities and bank deposits.

Further, the report features a review of financial services activity in 2018 and its contribution to the overall economy. The results of the survey showed a decline in employment within the banking sector, as entities continued to outsource operations and consolidate business lines. However, expenditure increase attributed to increases in both operational and capital expenses. A more stable outcome was recorded for the insurance industry, while the credit union sector sustained its positive growth trajectory.