Monthly Economic and Financial Developments (MEFD) April 2021

Published: Monday May 31st, 2021

Domestic Economic Developments

Overview

During the month of April, domestic economic activity continued to be dominated by the spread of the Novel Coronavirus (COVID-19), despite the rollout of vaccines. Specifically, internationally imposed travel restrictions to contain the spread of the virus continued to adversely affect the tourism sector, with the high value-added air component still sharply curtailed, while the sea segment remained on pause. Nonetheless, foreign investment-led projects and post-hurricane rebuilding works provided support to the construction sector. Meanwhile, the fiscal deficit widened considerably during the nine months of FY2020/2021, attributed to the Government’s increasing COVID-19 related spending and the falloff in revenue collections, combined with outlays still for post-hurricane reconstruction works. Monetary developments featured a modest increase in bank liquidity, despite domestic credit growth that surpassed the expansion in the deposit base. Further, external reserves recorded a modest growth during the review month, reflective of the slight uptick in foreign currency inflows though the private sector, due to the partial resumption in air visitors.

Real Sector

Tourism

Preliminary evidence suggests that tourism sector activity remained contracted during the month of April, as globally imposed travel restrictions related to COVID-19, resulted in depressed air traffic and the sea segment staying offline. However, domestic demand contributed to positive developments in the vacation rental market.

Data from the Nassau Airport Development Company Limited (NAD) revealed that total departures—net of domestic passengers—recovered to 47,332 in April, from a mere 445 in the same period last year, owing to the country closing its borders to contain the spread of the virus. Underlying this outturn, the dominant U.S. component totaled to 45,995, relative to just 250 a year earlier. In addition, non-U.S. departures amounted to 1,337, exceeding the 195 passengers in the comparative 2020 period. On a year-to-date basis, the reduction in outward bound traffic extended to 67.9%, from 37.1% in the previous year. By region, both non-U.S and U.S departures declined by 89.2% and by 63.8%, notably higher than respective reductions of 33.2% and 37.9% in the same period of the prior year.

In relation to the short-term rental market, data provided by AirDNA showed improvements during the month of April, supported by domestic demand. Specifically, total room nights sold increased by 36.8%, a reversal from the 50.4% decline in the previous year. Underpinning this outturn, bookings for entire place listings and hotel comparable listings grew by 38.0% and by 25.9%, respectively. Pricing indicators varied, as the average daily room rate (ADR) for hotel comparable listings rose by 1.8% to $172.42, while the ADR for entire place listings fell by 3.3% to $481.31.

On a year-to-date basis, total room nights sold decreased by 14.8%, reflective of a 25.7% falloff in private room listings and a 13.3% decline in bookings for entire place listings. Pricing data revealed that the ADR for both entire place and hotel comparable listings rose by 10.6% and by 4.7%, to $462.67 and $162.76, respectively.

Fiscal

Preliminary data on the Government’s budgetary operations for the first nine months of FY2020/2021 showed a widening in the deficit to $878.2 million from $251.3 million in the comparative period in FY2019/2020. Attributed to this outturn were notable revenue losses and higher spending associated with a rise in health and social welfare outlays, related to COVID-19 responses, combined with expenditure still related to post-hurricane rebuilding works. In the underlying developments, aggregate revenue contracted by $527.4 million (30.0%) to $1,229.8 million, while total expenditure expanded by $99.4 million (5.0%) to $2,107.9 million.

The reduction in revenue collections was led by a falloff in tax receipts by $518.2 million (33.4%) to $1,034.1 million, as taxes on goods and services fell by $376.3 million (32.7%). Specifically, VAT receipts decreased by $269.1 million (36.4%) to $469.8 million, while excise taxes reduced by $80.2 million to $129.0 million. Further, gaming taxes and taxes on the use of goods and services declined by $14.4 million to $16.4 million and by $8.3 million to $116.0 million, respectively. In addition, proceeds from international trade and transactions—inclusive of departure taxes, taxes on imports, customs and other import duties—contracted by $123.2 million (39.5%) to $163.0 million, owing to the slow recovery of tourism sector activity. Likewise, smaller decreases were posted for general stamp taxes ($4.3 million). In a modest offset, collections from property taxes rose by $11.6 million to $96.6 million. Non-tax revenue was lower by $9.1 million (4.4%) at $195.7 million, following a falloff of $14.1 million in receipts from the sale of goods & services to $111.8 million, on account of reduced proceeds from immigration and customs fees.

The growth in expenditure was due in large measure to a $129.6 million (7.2%) rise in recurrent outlays to $1,939.9 million. Underlying this outcome, social benefits outlays more than doubled to $270.4 million from $126.9 million last year, owing to significant support for unemployment and food assistance programs. In addition, interest payments grew by $21.8 million to $264.1 million, relative to the comparative period in FY2019/2020. Likewise, outlays for subsidies increased by $19.2 million to $330.0 million, while disbursements for the purchases of goods and services rose by $15.5 million to $381.1 million. In a partial offset, payments for employees compensation declined by $61.0 million (10.6%) to $513.1 million. Moreover, outlays for grants edged down by $0.6 million. Capital expenditure moved lower by $30.2 million (15.2%) to $168.0 million, as capital transfers fell by $27.8 million.

For full text reading, please download the attached document.