Monthly Economic and Financial Developments, July 2009
Published: Friday June 21st, 2019
Domestic economic conditions remained challenging over the review month, amid sustained softening in key global consumer demand indicators. The consequential weakness in the local tourism sector, combined with recessed levels of foreign investment-related construction activity, contributed to a deterioration in employment conditions. Continued easing in demand pressures resulted in a moderation in the inflation rate despite a firming in fuel prices during July. Money and credit trends for the month featured a contraction in liquidity and external reserves, reflecting the seasonal increase in demand for foreign currency in the latter half of the year.
Indications are that tourism output continued to be adversely impacted by the significant falloff in stopover visitors. Detailed data for the first five months of 2009 showed a modest 1.2% increase in aggregate arrivals, supported by a 9.0% advance in the larger sea segment, which overshadowed a 14.7% reduction in air traffic. Disaggregated by port of entry, tourists to New Providence and Grand Bahama grew by 4.0% and 1.6% respectively, owing to a rise in cruise visitors which offset the downturn in air arrivals. Conversely, the Family Island market registered a 3.9% contraction, as the fall in air passengers outpaced the marginal gain in sea visitors.
As domestic prices continued to stabilize, inflation for the twelve months to July fell by 0.4 percentage points to 3.9% from the previous month; but was still above the 3.3% rate recorded a year ago. The most significant cost increases were recorded for food & beverages (8.1%), ‘other’ goods & services (6.7%) and furniture and household operations (4.7%); while more modest price gains of under 4.0% were registered for the remaining categories. In other price developments, the Bahamas Electricity Corporation’s fuel surcharge for July rose on a monthly basis by 26.3% to 9.61 cents per kilowatt hour (KWh), but fell by 54.8% on a yearly basis. Similarly, average prices for diesel and gasoline firmed by 12.5% to $3.16 per gallon and by 4.8% to $4.16 per gallon in July, although still 47.9% and 27.5% below last year’s level.
Preliminary data on Government’s budgetary operations for the eleven months of FY2008/09 indicated that the overall deficit expanded by $139.2 million to $219.0 million from the previous year. Under weakened economic conditions, revenue collections fell by 6.1% to $1,201.7 million, due primarily to a 25.5% contraction in tax receipts. The most significant declines were noted for international trade taxes (13.0%), other “miscellaneous” stamp taxes (22.8%), departure (15.6%) and motor vehicle taxes (3.8%). Aggregate expenditure firmed by 4.5% to $1,420.7 million, associated mainly with a 5.3% rise in current outlays, as capital spending declined by 6.7%. The deficit was financed by a combination of Bahamian dollar and foreign currency borrowings.
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