Monthly Economic and Financial Developments, June 2010
Published: Monday August 9th, 2010
Preliminary indicators suggest ongoing weakness in economic output, although conditions have stabilized since the onset of the recent economic crisis, in the context of the global recovery. Aided by promotional activities to boost arrivals and occupancy levels, the tourism sector recorded modest gains year-on-year, but the performance remains below 2008’s level. Sharply moderated foreign investment inflows provided some support to construction activity, which is also receiving reduced stimulus from domestic activities, as evidenced by subdued growth in mortgage lending.
In monetary developments, banks’ profit remittances alongside recurring trade transactions, led to a contraction in both liquidity and external reserves for the review month. Both measures still remain at relatively healthy levels, partly on account of the lacklustre domestic demand conditions, which have also restrained employment growth opportunities, resulting in a further deterioration in banks’ credit quality indicators.
Preliminary data suggests that hotel performance indicators improved over the first half of the year, supported by higher occupancy rates and increased average daily expenditures. Between January and April, total visitor arrivals firmed by 10.2%, primarily on account of the strong 13.1% gain in the sea component, to 1.38 million—its highest level in over five years. Incentive programmes supported a recovery in the higher value-added air segment by 2.5%, from last year’s comparative 15.5% contraction; however, the numbers remained some 13.4% below their 2008 levels. By ports of entry, visitors to New Providence grew by 12.5%, led by a strong 18.2% gain in sea passengers and a more modest increase in air arrivals of 2.4%. In Grand Bahama, a 38.5% surge in sea visitors outpaced the 4.4% decrease in the air segment, for a 27.2% hike in overall visitors. The Family Island market posted a 0.6% advance in total arrivals, as the rerouting of several vessels to other local ports led to a 0.3% decline in the dominant sea component, which negated an 8.0% improvement in air passengers.
The fiscal outcome continued to be adversely impacted by the falloff in domestic economic activity. Government’s overall deficit for the eleven months of FY2009/10 worsened by almost 50% to $327.0 million, occasioned by increased expenditure and a falloff in revenue intake. Total receipts were lower by $46.7 million (3.9%) at $1.2 billion, as declining collections from international trade taxes, combined with reductions in non-trade related stamp taxes, led to a $74.1 million (7.1%) contraction in tax revenues. In contrast, non-tax receipts grew by $27.4 million (17.7%), buoyed by increased income payments. Total spending firmed by $60.9 million (4.3%) to $1.5 billion, as higher interest payments on a growing pool of domestic debt contributed to an $11.2 million (0.9%) rise in current outlays; and increased spending on infrastructure projects elevated capital expenditures by $17.4 million (15.7%). Net lending, to support budgetary operations of public sector entities, almost doubled to $32.4 million.
Reflecting the softening in global price pressures, inflation for the twelve months to May––as measured by changes in the average Retail Price Index––moderated by 3.7 percentage points to 1.0%. Price declines were noted for recreation, entertainment & services (1.8%) and housing (0.4%); while inflation levels moderated by 6.9 percentage points to 1.8% for other good & services, by 6.5 percentage points to 1.5% for food & beverages, and by 4.1 percentage points to 2.0% for furniture & household operations. Smaller accretions to average costs, of less than 2.0 percentage points, were recorded for the remaining categories, while the rise in average prices for clothing & footwear edged up, to 1.8% from 1.6%. With regard to electricity prices, the average fuel surcharge for the month of June was unchanged at 11.49 cents per kilowatt hour, although firming by 51.0% over the previous year.
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