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Quarterly Economic Review, September 2018

Published: Thursday December 20th, 2018

The Central Bank of The Bahamas is pleased to announce the release of its Quarterly Economic Review for the third quarter of 2018. The Review provides an examination of the performance of the domestic economy, as well as sectoral developments, principally during the period July to September.

Preliminary indications are that the domestic economy sustained its modest growth trajectory during the third quarter of 2018. Increases in high-end room capacity supported growth in the key stopover segment of the tourism market. In addition, a number of foreign investment projects provided ongoing stimulus to the construction sector, while domestic building activity showed signs of improvement. In price developments, inflation recorded a slight uptick, amid the rise in international oil prices in prior periods and the hike in the value added tax (VAT) rate by 4.5 percentage points to 12.0% on July 1 st .

The estimated fiscal deficit narrowed considerably over the first quarter of FY2018/2019, underpinned by a VAT-led rise in total receipts, which overshadowed the increase in aggregate expenditure. Budgetary financing was sourced mainly from the domestic market, and comprised a combination of long and short-term debt.

In monetary developments, liquidity contracted during the third quarter, due to a reduction in the deposit base, combined with growth in domestic credit. Amid the traditional increase in foreign currency demand during the latter half of the year, external reserves contracted. Banks' credit quality indicators improved over the review period, reflecting in part the modest uptick in economic activity. Further, the latest available data for the second quarter of 2018, showed that banks' overall profitability levels improved, primarily from a reduction in provisions for bad debts.

On the external side, the estimated current account deficit widened over the review period. There was a significant increase in net income payments, alongside a falloff in the services account surplus and higher net current transfer outflows. In addition, the surplus on the capital and financial account declined, largely reflecting the net repayment of public and private sector net external liabilities.

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