Monthly Economic and Financial Developments, May2006

Published: Monday July 3rd, 2006

During the month of May, economic activity in the domestic sector continued to be stimulated by robust tourism sector investment, domestic construction activity and firming in consumer demand. In addition, improvements in stopover visitors, combined with higher expenditures, supported a further modest expansion in tourism output during the year.

Data for the opening four months of 2006 indicated a 3.3% decrease in visitor arrivals to The Bahamas to 1,782,602. The contraction reflected continued weakness in cruise tourism, which declined by 6.8%, outstripping the 5.4% growth in air arrivals which contributed to strengthened stopovers trends. With regards to the major markets, visitors to New Providence and the Family Islands contracted by 4.6% and 8.0%, respectively. In contrast, the Grand Bahama market recorded a 15.3% expansion in overall visitors, due to robust growth in sea arrivals of 24.6%, while air tourists softened marginally.

Gains in the stopover segment were evident from the appreciated pricing and boosted occupancy levels in the hotel sector, which expanded room revenues by an estimated 9.6% to $159.1 million during the first four months of the year. The most significant improvement was noted in the Grand Bahama market, where room revenues rose by 30.2%, due to increases in average room rates and occupied room nights by 18.6% and 9.7%, respectively. Additionally, room revenues in the Family Islands firmed by 11.7%, owing solely to a 13.7% appreciation in average daily room rates. In New Providence, revenues improved by 6.3%, reflecting firming in average daily room rates and occupied room nights, by 3.0% and 3.2%, respectively.

Reflecting higher energy costs, average consumer prices in The Bahamas rose by 2.0% in the twelve-month period ending April 2006, compared to an expansion of 1.2% in the previous year. The most significant increases were seen in average costs for food and beverages (4.0%), other goods and services (3.0%) and housing (2.7%), associated with the fuel surcharge on electricity consumption. The other components registered average price hikes of less than 2.0%, with the exception of recreation and entertainment services and clothing and footwear costs, which contracted by 1.41% and 0.9%, respectively.

Preliminary data for the first ten months of FY2005/06, showed a comparative decline in Government’s deficit by 30.0% to $88.5 million. Revenue & grants advanced by $147.5 million (18.0%) to $965.3 million, while expenditures firmed by $110.0 million (12.0%) to $1,053 million. Buttressed by higher imports, tax receipts grew by $108.6 million (14.0%) to $873.5 million, while the early receipt of rental payments contributed to the $36.0 million increase in non-tax revenue to $88.6 million. Current expenditure rose by 13.0% ($103.7 million) to $925.2 million, owing mainly to higher wages and salaries a well as goods and services payments, while capital expenditures almost doubled to $88.6 million, reflecting higher outlays for infrastructure projects.

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