Monthly Economic and Financial Developments, February 2015
Published: Wednesday April 8th, 2015
Based on preliminary economic indicators, the Bahamian economy maintained a mild growth trajectory during the review month, aided by an improving tourism sector performance and ongoing foreign investment-led construction activity. Price developments featured some firming in average consumer prices in January, following the implementation of the new Value Added Tax (VAT) regime which also boosted tax revenues. However, the overall fiscal deficit for the seven months, through January, of FY2014/15, widened on account of higher spending. In the monetary sector, receipts from real sector activities supported growth in both external reserves and bank liquidity.
In a continuation of trends observed over 2014, initial reports suggest sustained gains in tourism output during the first two months of 2015. As reported by the Bahamas Hotel and Tourism Association, room revenues improved by 11.0%, inclusive of an 8.2 percentage point hike in the average occupancy rate to 70.5%, reflecting the combination of a higher visitor count and a reduction in inventory, due to the closure of a few mid-sized properties for renovations. Meanwhile, the average daily room rate (ADR) firmed by 8.9% to $268.11.
The implementation of the new 7.5% VAT regime led to modest board-based increases in average consumer prices, which rose over the twelve month period ending January, by 1.26% from 0.37% a year earlier. Average price gains intensified for recreation and culture, by 3.37 percentage points to 4.01% and for both alcohol beverages, tobacco & narcotics and transport, by 2.17 percentage points each to 6.48% and 2.80%, respectively. More moderate average cost increases, of under 2.0 percentage points, were recorded for most of the other categories, with the exception of communication costs, which rose slightly by 0.13%, to reverse last year’s 1.78% contraction. The decline in average prices for housing, water, electricity, gas, and other fuels—the most heavily weighted category—narrowed to 0.05% from 0.67%. In a slight offset, average cost gains moderated for restaurant & hotels, by 1.42 percentage points to 2.21% and miscellaneous goods & services, by 42 basis points to 0.91%.
The overall fiscal deficit deteriorated over the seven months of FY2014/15, by an estimated $48.6 million (20.1%) to $290.5 million, as a $79.5 million (7.6%) expansion in aggregate expenditure to $1,120.3 million outstripped the $30.9 million (3.9%) improvement in total receipts to $829.8 million. In particular, current outlays firmed by $53.0 million (5.8%) to $967.9 million, inclusive of broad-based gains in transfer payments, aggregating $50.3 million (12.9%) following the reclassification of certain goods and services items. Wages and salaries increased by $26.5 million (7.5%), while payments for goods and services declined by $23.8 million (13.7%). Capital spending rose by $19.2 million (22.1%) to $106.0 million, as the acquisition of new Defence Force ships led to a more than two-fold increase in asset acquisitions to $25.0 million. Outlays for infrastructure related works were higher by $6.2 million (8.3%) at $80.6 million, and net lending to public corporations advanced by $7.3 million (18.7%) to $46.4 million. The improvement in revenue performance was solely attributed to a $41.8 million boost in tax receipts, to $718.7 million; business & professional fees grew by $11.8 million, VAT receipts for the first month totalled $10.0 million and taxes on international trade were up by $4.4 million (1.3%). In contrast, non-tax collections contracted by $13.7 million (11.3%) to $108.1 million, associated with a $16.1 million (34.2%) falloff in income-related receipts to $30.9 million, which eclipsed the marginal $1.8 million (2.4%) gain in fines, forfeits & administrative fees.
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