Monthly Economic and Financial Developments, June 2005

Published: Tuesday August 2nd, 2005

The Bahamian economy continued to strengthen during the first six months of 2005, with intensifying foreign investment inflows and healthy domestic housing investments offsetting the slowdown in tourism receipts. Exchange Control data on foreign currency outflows also point to increased domestic expenditures on imports, partly reflecting the impact of higher oil prices. Firming in domestic expenditures has been supported by more accelerated credit expansion, albeit, in the context of some moderation in banking sector deposit growth. While this slowed the first-half buildup in external reserves, the seasonal improvement in bank liquidity continued at the same pace as in 2004.

Tourism statistics indicated that, for the first five months of 2005, the abatement in visitor earnings was mainly attributed to a decline in visitor arrivals to Grand Bahama, where a major resort remained closed following the 2004 Hurricane Season. More upbeat trends registered in New Providence and the Family Islands, with output gains in the stopover segment offsetting mild softening in cruise traffic. In the fiscal sector, Government's revenue growth was marginally softened to 4.9% during the first 11 months of the fiscal year (2004/05) through May as compared to the same period of the previous fiscal year. The cumulative deficit increased to $137.2 million ($118 million on an adjusted basis) from $85.9 million in the previous year as estimated expenditures rose at a faster pace of 9.9%, mainly owing to trends in recurrent outlays.

The economy's medium-term prospects remain favourable, with the expansion continuing to be concentrated in tourism, foreign investments and residential construction. This outlook is supported by the stable growth forecast for the US economy and improving conditions in other leading economies.