Monthly Economic and Financial Developments (MEFD) September 2021

Published: Monday November 1st, 2021

Domestic Economic Developments

Overview

Indications are that durnig the month of September, domestic economic activity continued to recover, albeit at a protracted pace, amid the ongoing strains of the COVID-19 pandemic. Tourism output further strengthened containing a more pronounced rebuilding of seasonal business as the year progressed, attibuted to improved vaccination efforts, both locally and internationally. However the year-to-date gains remained more tempered, as the result for the first quarter of 2020 largely escaped the pandemic, whereas the 2021 rebuilding only commenced late in the first quarter and then, only for stopover visitors. In price developments, domestic inflation firmed during the twelve months ending June, reflective of the uptick in global oil prices. Monetary developments for the month of September revealed a reduction in bank liquidity, as the expansion in domestic credit outstripped the growth in the deposit base. Also, external reserves contracted, as the public sector expressed a net demand for foreign currency.

Real Sector

Tourism

Tourism output sustained a slow pace of recovery in September, as ongoing globally imposed travel restrictions related to the COVID-19 pandemic continued to temper the pace of return to pre-pandemic levels. However, domestic demand provided further support to the vacation rental market.

Official data provided by the Ministry of Tourism (MOT) showed that total visitor arrivals by first port of entry recovered to 189,823 in August, from 5,385 in the corresponding period of 2020. Air arrivals rose to 86,140 compared to only 3,293 in the prior year—representing 65.7% of the arrivals recorded in 2019. In addition, sea traffic expanded to 103,683, from just 2,092 passengers in the comparative 2020 period. Disaggregated by major markets, total arrivals to New Providence increased to 112,206, compared to 1,358 a year earlier. Leading this outturn, the air and sea segments reached 69,333 and 42,873, respectively. Foreign arrivals to Grand Bahama resumed at 11,380, most concentrated in the sea component. Further, total traffic to the Family Islands strengthened to 66,237 vis-à-vis 3,974 in the prior year, as air and sea passengers amounted to 15,166 and 51,071, respectively.

On a year-to-date basis, total visitor count comparisons were still dominated by the more robust cruise arrivals for the first three months of 2020, albeit the more valuable stopover business already outpaced the 2020 results. A reduction still registered total arrivals, tapered to 54.6% from 65.9% a year earlier. However, air arrivals rebounded by 56.8%, following the 71.4% falloff recorded in the previous year, as all major destinations regained business (Table 1). Conversely, cruise activity remained constrained, evidenced by an 84.7% decline in sea traffic, relative to 2020’s contraction of 64.0%.

The most recent data provided by the Nassau Airport Development Company Limited (NAD) revealed that total departures—net of domestic passengers—advanced to 47,171 in September, from a modest 2,526 in the corresponding month of 2020. Specifically, U.S. departures recovered to 41,057 from 1,784 in the prior year, while non-U.S. departures increased to 6,114, from 742. On a year-to-date basis, the reduction in outward bound traffic narrowed to 35.4%, following a decline of 70.0% last year. Contributing to this outcome, U.S. departures grew by 53.0%, after a 71.1% falloff a year earlier. In contrast, the decrease in non U.S. departures slowed to 54.2%, from 62.9% in the previous period.

Data provided by AirDNA revealed continued strengthening in the vacation rental market during the month of September. In particular, compared to 2020, total room nights sold more than doubled to 62,339 from 22,292, as occupancy rates improved for entire place and hotel comparable listing to 43.4% and 42.4%, respectively, from approximately 33.0% in both cases last year. As depicted in Graph 1, average pricing (ADR) appreciated for entire place listings by 17.3% to $457.42, and for hotel comparable listings by 12.7% to $176.13.

Over the nine-month period, total room nights sold increased by 44.6%, reflecting respective gains in entire place and hotel comparable bookings, of 46.8% and 27.6%.

Prices

Reflective of the uptick in global oil prices, domestic consumer price inflation—as measured by changes in the average Retail Price Index for The Bahamas—firmed to 0.90% during the twelve months to June, from 0.88% in the same period of 2020. Underlying to this outturn, average prices for clothing & footwear rose by 12.7%, vis-à-vis an 8.4% reduction in the prior year. Further, average cost increases were recorded for miscellaneous goods & services (2.7%), food & non-alcoholic beverages (2.3%) and housing, water, gas, electricity & other fuels (1.3%), following declines a year earlier; while average inflation quickened for furnishing, household equipment & routine household maintenance (2.5%). Providing some offset, inflation moderated for alcohol beverages, tobacco & narcotics (2.5%), health (0.9%) and restaurants & hotels (0.2%). In addition, average prices declined for recreation & culture (3.3%) and transport (2.3%), following gains a year earlier; while the falloff in average costs for communication extended to 4.5%. Meanwhile, the average cost decrease slowed for education (1.6%).

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