Quarterly Economic Review, December 2016
Published: Monday March 13th, 2017
The Central Bank of The Bahamas is pleased to announce the release of its Quarterly Economic Review for the fourth quarter of 2016. The review provides an examination of the domestic economic performance, as well as sectoral developments, principally during the period October to December.
The passage of hurricane Matthew in October dominated domestic developments, as it disrupted tourism output and stalled fiscal consolidations efforts. Nevertheless, the subsequent rebuilding activity, along with the re-start of several varied-scale foreign investment projects, provided positive stimulus to the construction sector over the remaining months of the quarter. The aftermath of the storm also provided significant short-term employment opportunities, contributing to a decline in the jobless rate over the six-months to November and year-on-year. Domestic inflationary pressures remained contained, benefitting from the reduction in global oil prices in earlier periods.
In fiscal developments, the deficit widened during the second quarter of FY2016/2017, attributed in part to an increase in unplanned hurricane recovery related expenditure and revenue intake disruptions following the storm. Financing of the deficit was sourced mainly from the domestic market, and included a special $130.0 million syndicated hurricane relief loan.
On the monetary front, both bank liquidity and external reserves expanded, as the growth in the deposit base outstripped gains in credit during the review quarter. Further, amid the positive outlook for net foreign currency inflows, the Central Bank lowered its official Discount rate by 50 basis points to 4.00%, with the commercial banks following suit by cutting the Prime rate by the same amout on Janauary 3, to 4.25%; this effectively reduced base lending rates, and is anticipated to stimulate access to credit, mainly for mortgages. Banks’ credit quality indicators improved in the fourth quarter, benefitting from several initiatives, including the sale of delinquent mortgages, ongoing targeted debt restructuring operations and the Government’s mortgage relief programme. The sector’s capital adequacy ratio also continued to exceed regulatory requirements.
Provisional estimates indicated that the current account deficit narrowed markedly in the fourth quarter, reflecting the influx of re-insurance funds from the hurricane to facilitate rebuilding activities, while the surplus on the capital and financial account was reduced significantly, as domestic banks decreased their net external liabilities.
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