Monthly Economic and Financial Developments, March 2017

Published: Monday May 1st, 2017

Overview

Domestic economic activity was mildly improved during the review period, as work on foreign investment projects and to a lesser extent post-hurricane rebuilding activity, supported more construction sector output than in 2016; however, indications are that tourism performance was soft. Domestic energy costs fell marginally during March, but firmed significantly when compared to the same month last year, reflecting the gradual uptrend in global oil prices. With the cumulative setback from Hurricane Matthew still dominating, the fiscal deficit widened over the seven months of FY2016/2017, reflecting increased expenditure, combined with marginally lower revenue receipts. Monetary developments featured a modest decline in liquidity during the month, as the deposit base drawdown exceeded the falloff in Bahamian dollar credit; however, external reserves firmed marginally.

Real Sector

Tourism

Partial metrics for the month of March suggest that tourist arrivals were impacted by the late start to the Easter holiday period, relative to the prior year. In terms of visitor traffic, data from the Nassau Airport Development Company (NAD) showed a 10.2% decline in departures, a turnaround from a 6.7% uptick in March 2016. Within this trend, United States departing passengers fell by 11.6%, in contrast to a 7.9% increase in the prior year, when visitors from that market travelled for the long holiday weekend. In addition, travellers returning to other countries decreased by 1.3%, extending the prior year’s 0.2% contraction.

A similar trend was noted on a quarterly basis, as total departures—net of domestic travellers—decreased by 6.5% during the first three months, vis-à-vis a 4.0% gain a year earlier. In terms of the markets, United States travellers decreased by 7.0% during the review period, vis-à-vis a 5.5% gain a year ago, while the falloff in other departing visitors continued at 3.9% vis-à-vis 3.4% in 2016.

Prices

No inflation update was available since the January 2017 report; however, in the transportation sector, data on prices for the month of March showed that both diesel and gasoline softened by 0.3% and 1.2%, respectively, when compared to the previous month. Yet, given the moderate rise in international oil prices, which commenced during the latter part of 2016, prices at the pump were notably higher relative to the same month last year, with diesel costs up by 19.5% and gasoline prices, by 18.0%.

Fiscal Sector

Data on the Government’s budgetary operations for the seven months of FY2016/17, showed an $86.4 million (41.4%) rise in the deficit to $295.3 million. Partly amid the cumulative effects of Hurricane Matthew, this outcome was driven primarily by an $82.7 million (6.6%) increase in expenditure to $1,334.4 million, combined with a marginal $3.7 million (0.4%) decline in revenue to $1,039.1 million.

With regard to expenditure, current outlays grew by $70.1 million (6.3%) to $1,177.5 million, led by a $54.3 million (10.4%) expansion in transfer payments to $578.9 million. Specifically, subsidies and other transfers rose by $49.8 million (13.7%), amid a reclassification associated increase in transfers to public corporations, by $34.1 million (73.2%), and a $26.9 million (21.3%) rise in subsidies to the Public Hospital Authority for the launch of National Health Insurance (NHI). In addition, interest payments firmed by $4.5 million (2.8%), on account of a $4.4 million (8.9%) gain in payments on external loans. In addition, consumption expenditure expanded by $15.8 million (2.7%) to $598.6 million, as personal emoluments advanced by $16.2 million (4.2%), outpacing the slight, $0.4 million (0.2%) falloff in purchases of goods and services. Following the reclassification of support to public corporations, net lending stood at $0.1 million from a more substantive $39.0 million in FY2015/16. Meanwhile, capital spending also rose, by $51.5 million (48.9%) to $156.9 million, as outlays for hurricane rebuilding led to a $38.8 million (47.3%) boost in infrastructure outlays to $120.9 million, while asset acquisitions increased by $12.7 million (54.6%), to $36.0 million.

In terms of revenue, tax receipts fell by $2.8 million (0.3%) to $933.9 million. In terms of the components, value added tax (VAT) inflows contracted modestly by $5.8 million (1.5%) to $373.8 million, reflecting in part the hurricane related softening. In addition, property tax receipts narrowed by $9.2 million (15.0%). Conversely, business & professional fees expanded by $20.4 million (86.5%) to $44.0 million, while taxes on international trade rose by $4.4 million (1.5%), and selective taxes on services firmed by $4.3 million (41.6%), supported by gains in gaming taxes. In addition, both stamp tax and departure taxes moved higher by $9.7 million (17.7%) and $5.8 million (8.6%), respectively. Meanwhile, partly owing to improved recognition of classified revenue sources, other ‘miscellaneous’ taxes declined by $32.2 million (13.8%) to $201.8 million, as other ‘unclassified’ taxes measured just $0.4 million, compared to $37.6 million last year. Under non-tax receipts, collections weakened by $0.8 million (0.8%) to $105.2 million, as the $9.8 million (33.0%) reduction in income from ‘other’ sources, overshadowed the $8.7 million (11.8%) uptick in fines, forfeitures & administrative fees.

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