Monthly Economic and Financial Developments (MEFD) February 2023

Published: Monday April 3rd, 2023

Domestic Economic Developments

Overview

Preliminary indications are that during the month of February, the domestic economy sustained its recovery momentum, from the adverse effects of the Novel Coronavirus (COVID-19) pandemic. Tourism output continued to register strong growth, undergirded by gains in both the high value-added air segment and sea traffic, as travel restrictions related to COVID-19 remained eased, and the demand for travel in key source markets increased. On the fiscal front, Government’s budgetary operations for the first six months of FY2022/23 showed a narrowing in the deficit, underpinned by a rise in revenue collections, which outstripped the growth in aggregate expenditure. In price developments, average consumer price inflation—as measured by changes in the average Retail Price Index (RPI) for The Bahamas—rose during the twelve months to January, 2023 reflective of the pass-through effects of higher international oil prices. Monetary sector developments featured an expansion in banking sector liquidity, as the rise in the deposit base, contrasted with the reduction in domestic credit. Further, external reserves increased during February, reflecting Government’s external borrowing activities and private sector inflows.

Real Sector

Tourism

Initial data suggested that the tourism sector continued to register robust growth during the month of February, surpassing pre-pandemic levels. The performance continued to benefit from relaxed pandemic-related conditions and heightened demand for travel in key source markets.

Official data provided by the Ministry of Tourism (MOT) showed that total passenger arrivals rose to 0.8 million in February, from 0.4 million in the corresponding period of 2022. In particular, the dominant sea segment more than doubled to 0.7 million, from 0.3 million visitors in the prior year. In addition, air traffic stabilised at 0.1 million—exceeding pre-pandemic levels; representing 97.5% of the air arrivals recorded in 2019.

Disaggregated by major ports of entry, total arrivals to New Providence doubled to 0.4 million from 0.2 million in the previous year. Contributing to this outcome, the sea component advanced to 0.3 million visitors from 0.1 million in 2022, while the air segment rose to 0.1 million from 79,496 million in the preceding year. Further, traffic to the Family Islands strengthened to 0.4 million visitors, from 0.2 million in the prior year, owing to gains in the sea and air components to 0.4 million and 30,112, respectively. Similarly, foreign arrivals to Grand Bahama totalled 39,467 visitors, surpassing the 13,230 registered in the previous year, as respective air and sea passengers measured 4,927 and 34,540.

On a year-to-date basis, total arrivals recovered to 1.7 million, compared to 0.7 million in the comparative 2022 period. Supporting this outcome, air arrivals grew to 0.3 million passengers, vis-à-vis 0.2 million a year earlier, reflecting gains in all major source markets. Similarly, sea arrivals increased more than two-fold to 1.4 million visitors, from 0.6 million in the prior year.

The most recent data provided by the Nassau Airport Development Company Limited (NAD), affirmed the positive momentum in stopover business, as total departures—net of domestic passengers—increased by 51.9% to 121,919 in February, as compared to the corresponding period of 2022. Specifically, U.S. departures moved higher by 46.0% to 101,705, while non-U.S. departures nearly doubled to 20,214. On a year-to-date basis, outward-bound traffic expanded by 58.8% to 250,084 passengers. In particular, U.S. departures rose by 54.9% to 208,942 visitors, compared to the previous year. Likewise, non-U.S. departures grew by 82.1% to 41,142 vis-à-vis the same period last year.

Data provided by AirDNA on the short-term vacation rental market mirrored these positive trends. Specifically, during the month of February, total room nights sold moved higher by 51.1% to 148,726 nights. Correspondingly, the occupancy rates for both entire place and hotel comparable listings increased to 66.3% and 63.6%, respectively, vis-à-vis 55.2% and 50.7% in the previous year. Further, price indicators showed that year-over-year, the average daily room rate (ADR) for entire place rose by 9.6% to $533.56 and for hotel comparable listings, by 8.6% to $196.91.

Fiscal

Preliminary data on the Government’s budgetary operations for the first six months of FY2022/23 revealed that the deficit narrowed to $276.0 million from $281.3 million in FY2021/22. Underlying this outturn, total revenue expanded by $124.6 million (11.0%) to $1,258.3 million, outpacing the $119.3 million (8.4%) increase in aggregate expenditure to $1,534.3 million.

The recovery in revenue collections was largely attributed to a $130.6 million (13.5%) rise in tax receipts. Specifically, taxes on goods and services grew by $17.8 million (2.6%), as VAT receipts strengthened by $54.2 million (10.0%), to $598.8 million, responding to the recovery in economic activity. In addition, financial & realty stamp taxes increased by $5.7 million (11.9%) to $53.5 million. Further, revenue from gaming taxes rose by $8.4 million (47.2%) to $26.1 million. Likewise, proceeds from international trade and transactions—inclusive of exports, customs & other import duties and departure taxes—expanded by $88.5 million (39.2%) to $314.3 million, relative to the prior fiscal year. In addition, property tax collections grew by $22.7 million (61.6%) to $59.5 million, while general stamp taxes increased by $1.6 million (37.0%) to $5.8 million. In contrast, non-tax revenue decreased by $7.0 million (4.1%) to $160.6 million, as property income fell by $17.5 million (35.4%) to $32.0 million, while proceeds from the sale of goods and services reduced by $14.0 million (12.2%) to $100.2 million.

As it relates to expenditure, recurrent spending grew by $105.3 million (8.0%) to $1,416.6 million. The outturn was led by a rise in employee compensation by $42.2 million (11.8%) to $399.4 million, while interest payments moved higher by $41.1 million (17.1%) to $280.9 million. In addition, payments for the use of goods & services rose by $24.1 million (9.6%) to $274.5 million. Further, other “miscellaneous” payments advanced by $32.2 million (32.5%) to $131.2 million, largely attributed to a growth in current transfers and insurance premium payments. However, subsidies moderated by $5.6 million (2.5%) to $219.5 million, owing to reduced outlays to public non-financial institutions, as the need for COVID-19 related support waned. Similarly, outlays for social benefits declined by $29.0 million (21.4%) to $106.6 million. Capital outlays grew by $14.0 million (13.5%) to $117.7 million, as spending for the acquisition of non-financial assets expanded by $20.1 million (24.9%) to $101.1 million. Contrastingly, capital transfers reduced by $6.1 million (26.8%) to $16.7 million.

Prices

Average domestic consumer price inflation—as measured by the All Bahamas Retail Price Index—increased to 5.7% during the twelve months to January, from 3.2% in 2022, reflective of the pass-through effects of higher prices on imported oil and other goods and services. In particular, average costs rose for recreation & culture by 14.6%, after registering a reduction in the previous year. Further, average inflation accelerated for food & non-alcoholic beverages (13.6%), restaurant & hotels (12.1%) and transport (11.1%). Similarly, the rise in average costs quickened for health (5.0%) and housing, water, gas, electricity & other fuels (3.8%); while average prices for miscellaneous goods & services firmed by 0.1%, following a decline of 1.2% in 2022. Providing some offset, the average inflation slowed for communication (6.5%), clothing & footwear (3.2%), education (1.5%), furnishing, household and equipment (1.0%) and alcohol beverages, tobacco & narcotics (0.3%).

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