Quarterly Economic Review, March 2020
Published: Thursday June 25th, 2020
The Central Bank of The Bahamas is pleased to announce the release of its Quarterly Economic Review for the First Quarter of 2020. The Review provides an examination of the domestic economic performance, as well as sectoral developments, principally during the period January to March.
Initial indications are that the domestic economy contracted during the first quarter of 2020, dominated by the Novel Coronavirus (COVID-19) pandemic. Globally imposed travel restrictions related to COVID-19 resulted in a falloff in tourism sector output, as both the high value-added air segment and sea passengers came to a halt in March. Further, foreign investment-related activity, and to a lesser extent ongoing post-hurricane rebuilding work, which provided stimulus to the construction sector, also paused, owing to the compulsory lockdown of the country in an attempt to contain the spread of the virus. In price developments, domestic inflation remained relatively subdued, reflective of the decrease in international oil prices.
Provisional data for the third quarter of FY2019/2020 showed that the Government's position reversed to a deficit from a surplus in the comparative quarter of FY2018/2019. The outturn was largely attributed to unplanned hurricane-related spending and disrupted revenue collections from the storm, which contributed to a hike in aggregate expenditure and a falloff in total revenue. Budgetary financing was obtained mainly from the domestic market, comprising of a combination of long and short-term debt.
In monetary developments, both bank liquidity and external reserves expanded, as the receipt of re-insurance proceeds, led to the build-up in the deposit base, which contrasted with the reduction in domestic credit. However, banks' credit quality indicators weakened slightly during the first quarter. Nevertheless, the latest available data for the fourth quarter of 2020, showed an increase in banks'overall profitability, as the rise in income from interest earned and commissions & foreign exchange fees, outstripped higher operating outlays.
On the external side, the estimated current account balance recorded a deficit during the review quarter, vis-a-vis a surplus in the corresponding period last year. Contributing to this development was a considerably tourism-related decline in the services account surplus, combined with a widening in the merchandise trade deficit and a rise in net income outflows. In contrast, the capital and financial account shifted to a surplus from a deficit a year earlier, largely reflecting a reversal in the "other investments" balance to a net receipt from a net outflow, and gains in net direct investment inflows.
The report also features a review of financial services activity in 2019 and its contribution to the overall economy. The results of the survey indicated a decline in employment within the banking sector, due to ongoing automation of operations and consolidation of businesses. However, expenditure increase owing largely to a rise in operational costs. Meanwhile, despite the losses suffered by non-life firms following the passage of Hurricane Dorian, the insurance industry registered a stable outturn, while the credit union sector recorded a modest improvement in its operations.
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