Advance Release of Domestic Economic Review, Qtr. II, 2006

Published: Tuesday September 19th, 2006

Preliminary data indicate that the Bahamian economy maintained its positive momentum during the second quarter of 2006, benefiting from strengthened tourism output, construction activity and domestic consumer demand. Although the pass-through effects of higher international oil prices resulted in broad-based increases in domestic costs, inflation remained at relatively modest levels. The fiscal situation for the first eleven months of FY2005/06 was appreciably improved as higher tax and income-related receipts surpassed growth in expenditure, to occasion a sharp contraction in Government's deficit. In the monetary sector, public sector foreign currency borrowings augmented money supply growth which outpaced the sustained expansion in domestic credit. In this context, lower levels of accretion were achieved for both liquidity and external reserves. However, buoyant consumer demand conditions supported a narrowing in the loan-to-deposit spread. In the external sector, the escalation in fuel costs combined with heightened import demand resulted in a near doubling of the current account deficit, while increased investment inflows for tourism related projects led to a modestly higher surplus on the capital and financial account.