Monthly Economic and Financial Development, September 2019

Published: Monday November 4th, 2019

Domestic Economic Developments

Overview

Domestic economic developments for the month of September were dominated by the passage of Hurricane Dorian, which resulted in a falloff in tourism relative to an average monthly strengthening during the first eight months. Nonetheless, positive impulses to construction output from foreign direct investment projects were sustained, with contributions from the domestic sector likely to increase as post-hurricane rebuilding efforts intensify. Further, domestic energy costs firmed in the twelve months to July, reflecting the pass-through effects of the previous-year's increase in the value added tax (VAT) rate. In the monetary sector, bank liquidity expanded during the review month, as the rise in total deposits outpaced the growth in credit, while external reserves grew amid foreign currency inflows from reinsurance receipts and to a lesser extent from real sector activities.

Real Sector

Tourism

Preliminary data suggests that, monthly tourism output softened, reflecting the effects of the passage of Hurricane Dorian, which adversely impacted outturns in Grand Bahama and the Family Islands.

The most recent data from the Ministry of Tourism (MOT), revealed that total visitor arrivals contracted by 12.8% in September, following a 62.4% surge during the same period last year - when the Baha Mar properties' capacity boost settled-in. By port of entry, the high value-added air component fell by 14.7%, reversing 2018's 48.7% strengthening. Likewise, the sea segment retreated by 12.4%, in a turnaround from a 65.3% expansion in the prior year.

A disaggregation by island, showed broad-based declines across major markets during September. In New Providence, arrivals fell by 8.1%, vis-a-vis the previous year's 41.8% improvement, with reductions in sea and air arrivals of 8.3% and 7.7%, respectively. In addition, tourists to the Family Islands weakened by 9.8%, following a more than two-fold increase in the prior year. This outturn included a retrenchment in air passengers of 37.6% - with Abaco recording no visitors during the month - while sea traffic lessened by 7.9%. Similarly, total arrivals to Grand Bahama decreased by 63.4% - the sharpest reduction since Hurricanes Francis and Jeanne in September 2004 -following a 13.3% gain a year ago, as the island's air traffic diminished by 82.0% and sea visitors contracted by 61.5%.

Buttressed by the strengthening during the first half of the year, total arrivals retained gains of 10.4% on a year to date basis, surpassing the 8.5% growth last year. Specifically, the sea segment grew by 10.1%, outstripping the 6.1% rise of the previous year, while air arrivals growth moderated to 11.6% from 16.5%. The overall improvement was anchored by New Providence, where visitor arrivals advanced by 16.7%, surpassing 2018's 0.1% uptick, supported by a rebound in sea tourists (up 17.2%) and a steady rise in air traffic (up 15.6%). In contrast, growth in arrivals to the Family Islands tapered to 8.9% from 25.4% in 2018, owing to decelerated gains in both air and sea arrivals to 3.3% and 9.9%, respectively. In Abaco, air traffic slowed sharply to 1.0%, from 18.2% a year ago; while arrivals to Grand Bahama contracted by 15.8%, after the prior year's 8.9% improvement, on account of a weakening in both market segments.

Data from The Bahamas Hotel & Tourism Association (BHTA) and the Ministry of Tourism (MOT) for a sample of large hotels in New Providence and Paradise Island confirmed a deterioration in hotel sector performance for the month of September. The average occupancy rate eased by 1.0 percentage point to 36.5%, amid a 1.0% falloff in room nights sold. Nevertheless, the average daily room rate (ADR) edged up by 0.6% to $167.39, however New Providence's room revenue was flat during the month. Taking the remaining Northern Bahamas into account, the overall projected outcome was a reduction in stopover earnings in September. Conversely, in the nine months to September, expansion remained evident, with surveyed large properties in New Providence experiencing a revenue boost of 25.0%. The average occupancy rate rose by 8.5 percentage points to 72.0%, while the number of room nights sold moved higher, by 16.0% and the ADR appreciated by 7.8% to $265.05.

Reflecting the impact of Hurricane Dorian's passage early September, data provided by the Nassau Airport Development Company Ltd. (NAD), showed a 9.2% contraction in departures of foreign persons, sharply contrasting with the 42.3% increase secured during the same period last year. Specifically, growth in the dominant U.S. segment tapered to 9.2%, from the prior year's 44.7% expansion, while traffic by non-U.S. international passengers was reduced by 8.9%, vis-a-vis last year's 30.5% strengthening. Underpinned by improvements in earlier months, total foreign departures expanded by 15.2% during the nine-months to September, extending a 13.4% growth recorded over the same period of 2018. U.S. departures rose by 16.6%, compared to a 12.7% advance a year earlier; however, the growth in the non-U.S. international component slowed to 7.0% from 17.8%.

The storm's impact on capacity in the short-term rental market was also evident in AirDNA estimates for September. In particular, the number of total available listings contracted by approximately 19.9% month-on-month, outdistancing the 2.8% falloff during the same month of 2018, owing to broad-based declines across major markets. Further, when combined with seasonal patterns, this was also accompanied by a reduction in bookings for the month. In terms of pricing, both hotel comparable and entire place listings posted declines in their average daily room rate (ADR) of 4.7% to $142.11 and 14.2% to $337.88, respectively.

On a year to date basis, available rental listings grew by 17.1%, with an increase in properties for both entire place and private room offerings. Likewise, bookings were 31.7% higher over the same period in 2018, reflecting improvements across all major markets, but with lower average prices for both hotel comparable (7.3%) and entire place accommodations (2.4%).

Prices

During the twelve months to July, the domestic inflation rate increased by 1.5 percentage points to 3.11%, reflecting the ongoing impact of the 2018 rise in the VAT rate. A breakdown by segment showed that after posting reductions in 2018, the average prices registered upticks for furnishing, household equipment & maintenance, clothing & footwear items and for unclassified or miscellaneous goods & services. In addition, gains in average prices accelerated for transport, alcoholic beverages, tobacco & narcotics and health; while the average increases slowed for restaurants & hotels, housing, water, gas, electricity & other fuels, and food & non-alcoholic beverages; while prices for education, communication, recreation and culture were lowered.

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