Monthly Economic and Financial Developments (MEFD) March 2020

Published: Monday May 4th, 2020

Domestic Economic Developments

Overview

During the review month, developments in the domestic economy were dominated by the Novel Coronavirus (COVID-19) pandemic. Globally imposed travel restrictions related to COVID-19 adversely impacted tourism output, as both the high value-added air segment and sea traffic ground to a halt. While the construction sector was undergirded by ongoing foreign investment projects and hurricane rebuilding efforts, these also paused as the Emergency Powers (COVID-19) Order, 2020, imposed a lockdown of the country. On the monetary front, bank liquidity contracted over the review period, as the expansion in domestic credit outpaced the rise in the deposit base. Further, external reserves grew, albeit a slowdown from the prior month, buoyed by net foreign currency inflows from re-insurance receipts. The Central Bank's policy posture, meanwhile, shifted to promoting credit forbearance for borrowers displaced by the pandemic and to managing foreign exchange market stability.

Real Sector

Tourism

Ahead of the pandemic impact, damage from Hurricane Dorian still weighed down stopover tourism, discounting strong cruise sector growth, which also featured significant shifts in calls to private ports facilities outside of New Providence and Grand Bahama.

Official data provided by the Ministry of Tourism (MOT) revealed that total foreign arrivals grew by 17.0% for the month of February, extending the 13.9% growth during the same period in the previous year. In the underlying developments, sea traffic gains (largely cruise visitors) accelerated to 23.6%, after a 12.1% rise the prior year. However, air arrivals decreased by 3.1%, in a reversal from the 19.7% expansion in 2019 that had captured the hotel capacity boost from Baha Mar.

A breakdown by island, revealed that arrivals to the Family Islands increased by 50.9%, after a 0.2% uptick a year earlier, as sea passengers expanded by 64.1%, outstripping the 28.2% reduction in air traffic. This reflected increased first ports of call to the private island developments of cruise lines. Visitor arrivals growth for New Providence tapered to 0.5%, from a healthy 32.2% expansion last year, with the air component increasing further by 5.9%, while sea arrivals declined by 2.0%. Conversely, the contraction in arrivals to Grand Bahama continued, but at a sharply moderated 2.2%, compared to 22.3% during the same period last year. This reflected a 48.6% reduction in air arrivals, which outweighed the 5.5% gain in the sea segment.

For the first two months of the year, total arrivals rose by 12.3%, but was below the 16.6% growth recorded in the previous year. Notably, a 16.9% increase in sea passengers, negated the 3.3% falloff in air visitors. The Family Islands experienced a 57.1% boost, extending the 10.0% gain in the prior year, with robust cruise segment gains eclipsing the sharp falloff in air arrivals that was mainly due to Abaco's capacity absence. In contrast, visitors to New Providence declined by 7.3%, vis-a-vis a 31.0% expansion in 2019, with the reduction in the sea segment, outpacing further stopover traffic increase. Similarly, underpinned by contractions in both air (49.9%) and sea (6.5%) arrival, total traffic to Grand Bahama fell by 12.2%.

The latest data from The Bahamas Hotel & Tourism Association (BHTA) and the MOT indicated that pricing and occupancy trends among large surveyed resorts culminated in a marginal hotel room revenue growth of 1.0% during February. This reflected a 0.7% decrease in the average daily room rate (ADR) to $272.24, and a 1.8% growth in room night sales. However, the average hotel occupancy rate fell by 1.1 percentage points, to 76.5%. For the year-to-date, room revenue declined by 1.0%, as the ADR reduced by 1.1% to $266.71, and the average occupancy rate moved lower by 0.8 percentage points to 72.8%, despite a 1.0% rise in the number of room nights sold.

The most recent data, provided by AirDNA showed that for the month of March, activity within the short-term vacation rental market contracted. Specifically, total room nights sold decreased by 3.3%, contrasting with a 56.2% growth during the same period in the previous year. Underlying this developments, bookings for both entire place listings and hotel comparable fell by 1.9% and 13.4%, respectively. In contrast, the average daily room rate (ADR) for both entire place listings and hotel comparable rose by 12.9% to $412.19 and by 2.3% to $153.89, respectively. On a year-to-date basis, total room nights sold advanced by 21.9%, as bookings for both entire place and hotel comparable advanced by 19.9% and 38.9%, respectively. Conversely, the ADR for entire place and hotel comparable listings declined by 3.3% and 3.5% to $383.01 and $152.47, respectively.

Employment

Owing to the passage of Hurricane Dorian, which dislocated significant parts of the workforce in Grand Bahama and Abaco, the latest Labour Force Survey by the Department of Statistics was confined to just New Providence. The Survey revealed that, for the 12 months to November 2019, conditions in New Providence improved, with the number of employed persons increasing by 4.6% to 152,640, extending the 2.4% gain of the preceding year. After factoring the labour force growth of 4.4%, to 170,835 the unemployment rate narrowed by 30 basis points to 10.7%.

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