Monthly Economic and Financial Development August 2018
Published: Monday October 1st, 2018
Overview
Preliminary indicators suggest that the economy’s modest growth rate was sustained over the review period, buoyed by gains in tourism sector metrics and positive impulses from foreign investment-led construction activity. In terms of prices, the pass-through effects of elevated international oil prices contributed to an uptick in domestic energy costs during the month. Monetary developments featured a contraction in liquidity, reflecting an increase in commercial bank lending to the Government, as well as a falloff in domestic deposits. In addition, external reserves contracted, due to a rise in foreign currency demand to facilitate public and private sector transactions.
Real Sector Tourism
Official data from the Ministry of Tourism, showed improvements in the country’s main sector over the first half of the year. Total visitor arrivals firmed by 4.1%, in contrast to a 2.0% decline in the prior period. Buoyed by increased airlift, and a significant expansion in high-end room inventory, air arrivals strengthened by 15.2%, vis-à-vis a 6.0% reduction in the prior year. Meanwhile, sea visitors edged-up by 0.8%, after a falloff of similar magnitude in 2017.
When assessed by first port of entry, visitors to the Family Islands firmed by 18.4%, compared to a 6.7% contraction in the previous period. This outturn reflected growth in the high value-added air segment by 12.2%, following the prior year’s 15.2% increase, while the dominant sea component expanded by 19.6%, a turnaround from a 10.2% decrease in the previous period. In addition, arrivals to Grand Bahama increased by 7.2%, vis-à-vis a 25.0% hurricane-related retrenchment a year ago. This reflected growth in sea traffic by 8.1%, compared to a 21.5% contraction in 2017, while the reduction in air visitors slowed to a mere 0.2%, from 44.3% a year earlier. In a slight offset, total visitors to the capital decreased by 3.7%, a reversal from a 6.8% gain in the previous period. The dominant sea segment declined by 11.6%, a turnaround from the prior year’s 12.8% improvement; however, an increase in high-end room capacity contributed to the 17.3% strengthening, in comparison to a 6.5% decrease in 2017.
The ongoing gains in air arrivals translated into an improvement in stopover metrics, as information from the Bahamas Hotel and Tourism Association and the Ministry of Tourism’s survey of large hotels, showed that total room revenue expanded by 30.0% during the first seven months of 2018. This outcome was supported by a 26.0% increase in the number of room nights sold; although the growth in overall room capacity led to a 1.3 percentage point reduction in the occupancy rate to 66.9%, while the average daily room rate (ADR) rose by $8.75 (3.5%) to $255.77.
Partial information from the Nassau Airport Development Company Limited (NAD) revealed that the gain in tourist arrivals was sustained during the month of August, as total departures—net of domestic passengers—rose by 11.7%, relative to a 0.3% contraction in the previous year. This outturn reflected a 10.6% increase in the US segment, compared to a 0.6% uptick a year earlier, and a 20.0% expansion in the non-US international component, in contrast to a 6.9% decline in the previous year. Information compiled over the eight-month period, showed similar trends. Total departures grew by 11.8%, a reversal from 2017’s 1.5% reduction, with both US and non-US international departures increasing by 10.9% and 17.0%, in comparison to declines of 1.5% and 1.7%, respectively, a year ago.
Similarly, indicative of the growing popularity of the short-term private rental market, data from AirDNA showed a 41.2% increase in booked listings via the Airbnb platform during August for All Bahamas in comparison to the same period in 2017. These results are also influenced by the fact that more properties are listing on the site each year. In terms of the broad trends in the major markets, the number of listings in Exuma firmed by 54.7%, while gains of 37.8%, 34.8%, and 28.0%, were noted for New Providence, The Abacos, and Grand Bahama, respectively. In terms of the key segments, the ADR for the entire place listings rose by 1.8% to $319.77, while that of hotel comparable listings fell by 3.1% to $132.19.
Prices
During the twelve months to June, the All Bahamas Retail Price Index rose by 1.3%, outpacing the 0.9% gain a year earlier. This development was led by increases in the restaurant & hotels, recreation & culture and food & non-alcoholic beverages components of 4.7%, 3.2% and 1.8%, respectively, each reversing declines noted in the prior year. Further, inflation rates quickened for transport by 1.8 percentage points to 2.4%, health by 90 basis points to 1.6% and housing, water, gas and electricity—the largest category—by 10 basis points to 2.5%. In a partial offset, prices moderated for clothing and footwear, furnishing and household equipment, education and miscellaneous goods & services.
In terms of domestic energy costs, during the month of August the Bahamas Power and Light’s (BPL) fuel surcharge edged-up by 0.5% to 17.47 cents/KWH, relative to the previous month, and firmed by 26.7%, year-on-year.
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