Monthly Economic and Financial Developments, July 2012
Published: Monday September 10th, 2012
Indications are that the domestic economy continued to experience positive, although mild, growth in July, featuring steady gains in tourism sector output and foreign investment and public sector related construction activity. Higher global food prices translated into a modest firming in average domestic consumer prices. Government’s overall deficit widened over the eleven months of FY2011/12, as increased spending offset the rise in revenue collections. In the monetary sector, bank liquidity remained at elevated levels, amid weakness in private sector demand, which continued to be constrained by elevated levels of debt and unemployment. The external reserves position contracted, due partly to banks’ profit repatriations and the traditional upturn in net foreign currency demand in the latter half of the year.
Preliminary tourism sector data for the seven months of the year showed an increase in overall activity, benefitting from the ongoing recovery in key source markets and the impact of public/private sector incentive programmes to boost occupancy levels. Total visitor arrivals strengthened by 8.1% to 3.67 million, extending the 7.0% gain of 2011. Notably, there was a rebound in air traffic by 8.6%, in contrast to the prior year’s 3.3% contraction, while growth in the dominant sea component tapered to 8.0% from 2011’s 10.9%. Disaggregated by first port of entry, visitors to New Providence were up by 12.0% to 1.97 million, on account of a 13.2% surge in sea traffic and a robust 9.7% gain in the high value-added air segment. Similarly, the number of tourists to the Family Islands expanded by 5.9%, occasioned by improvements in both sea (6.5%) and air (1.2%) arrivals. In contrast, the Grand Bahama market fell marginally by 0.1%, as the 2.0% reduction in the larger sea segment overshadowed the 14.4% rise in air visitors.
Domestic price inflation for the twelve months to July—as measured by the Bahamas’ Retail Price Index—firmed by 0.43 of a percentage point to 2.78%. Average cost increases were higher for food & non-alcoholic beverages (2.87 percentage points) and furnishing, household equipment & maintenance (2.01 percentage points) to 3.07% and 3.78%, respectively. Following a decline of 0.63% a year earlier, average prices rose for clothing & footwear by 1.21%. In a modest offset, the inflation rate for housing, water, gas, electricity & other fuels—the most heavily weighted component of the index—eased slightly to 3.16% from 3.24%, with more decelerated average cost gains of 1.81, 0.74 and 0.61 percentage points for transport, recreation & culture and alcohol, tobacco & narcotics, to 4.96%, 0.42%, and 1.50%, respectively. Apart from communication costs, which remained relatively unchanged compared to an increase of 1.1% in 2011, most of the other categories recorded more modest reductions in price gains.
Domestic fuel costs trended downwards in July, benefitting from a reduction in international oil prices in the earlier months. The average price of gasoline and diesel declined by 4.5% and 8.2%, on a monthly basis, to $5.27 and $4.81 per gallon, respectively; however, over the year, the average price of gasoline was flat, while diesel costs rose by 3.4%. In contrast, the Bahamas Electricity Corporation’s fuel charge was higher by 5.7% month-on-month, at 28.51¢ per kilowatt hour (kWh), and surged by 25.3% relative to last year.
Based on preliminary fiscal data, the Government’s overall deficit for the eleven months to May of FY2011/12 widened by $56.8 million (24.0%) to $293.8 million, when compared to the same period a year ago. This outcome, reflected a $117.8 million (7.8%) rise in aggregate spending to $1,622.9 million, which eclipsed a $61.1 million (4.8%) improvement in total receipts to $1,329.1 million. On the spending side, current outlays grew by $28.2 million (2.2%) to $1,330.2 million, led by hikes in purchases of goods & services and wages & salaries, of 18.3% and 3.4%, respectively. However, transfer payments declined by $35.5 million (6.6%), as interest expenses contracted by $14.0 million (7.4%) and subsidies & other transfers decreased by $21.6 million (6.1%). Capital spending firmed by $38.2 million (24.3%) to $195.6 million, of which 81.5% was associated with ongoing infrastructure development works, while net lending to public corporations doubled to $97.1 million. Under revenue, the $24.8 million (2.2%) increase in tax receipts, to $1,180.7 million, included a $124.0 million (67.0%) expansion in excise taxes, which were bolstered by the receipt of arrears payments by a public corporation, and was significantly offset by an $89.0 million (18.9%) contraction in “miscellaneous” tax collections to $382.2 million from the previous year, when one-off stamp tax collections from the sale of a local oil company boosted receipts. Total non-tax revenues rose by $18.5 million (16.5%) to $130.6 million, buoyed by a $20.9 million expansion in income from “other” sources, associated with higher interest and dividend earnings, which outstripped a $1.7 million (2.1%) contraction in fines, forfeits and administrative fees. In addition, reflecting the receipt of proceeds from the sale of a Government building, capital receipts surged to $17.7 million from negligible levels a year earlier.
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