Quarterly Economic Review September 2020
Published: Monday December 14th, 2020
The Central Bank of The Bahamas is pleased to announce the release of its Quarterly Economic Review for the third quarter of 2020. The Review provides an examination of the performance of the domestic economy, as well as sectoral developments, principally during the period July to September.
Domestic economic developments continued to be driven by the Novel Coronavirus (COVID-19) pandemic, which negatively impacted economic activity during the third quarter of 2020. In particular, the global lockdown impeded tourism sector output, with both the high value-added air segment and dominant sea traffic remaining largely offline over the review quarter. Nevertheless, the restart of foreign investment projects, and to a lesser extent continued post-hurricane rebuilding works, provided some stimulus to the construction sector. In price developments, domestic inflationary pressures remained contained over the review period, underpinned by the reduction in international oil prices.
Provisional data for the first quarter of FY2020/21 revealed that the Government’s overall deficit widened significantly in comparison to the year-earlier period. Contributing to this outcome, was a marked decrease in revenue collections, along with a rise in outlays, primarily for social welfare related to COVID-19. Budgetary financing was led by borrowings from external sources and included $248 million in bridge financing and a $200 million policy-based loan from the Inter-American Development Bank (IDB).
In monetary developments, the growth in domestic credit contrasted with the reduction in the deposit base. However, both bank liquidity and external reserves increased during the review quarter, largely on account of foreign currency inflows from the Government’s external borrowings. Meanwhile, banks’ credit quality indicators deteriorated during the third quarter, as some banks concluded their COVID-19 related forbearance programs. Further, the latest available data for the second quarter of 2020 indicated that banks’ overall profitability contracted, owing primarily to a rise in provisioning for bad debt.
On the external side, during the third quarter, the estimated current account deficit widened considerably, as the services account position shifted to a deficit from a surplus in the previous year, with the global lockdown related to the COVID-19 pandemic, resulting in negligible tourism receipts. In contrast, the surplus on the capital and financial account increased markedly, led by a notably rise in net debt inflows to the Government.
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