Quarterly Economic Review September 2021
Published: Wednesday December 8th, 2021
The Central Bank of The Bahamas is pleased to announce the release of its Quarterly Economic Review for the third quarter of 2021. The Review provides an examination of the performance of the domestic economy, as well as sectoral developments, principally during the period July to September.
Indications are that the domestic economy maintained a measured pace of recovery during the third quarter of 2021, despite the ongoing spread of the Novel Coronavirus (COVID-19). Specifically, tourism sector output further strengthened, undergirded by continuing gains in the high value-added air segment and an uptick in sea traffic, reflecting sustained progress in vaccination efforts, both locally and internationally. In addition, a number of varied-scale foreign investment projects, and to a lesser extent continued post-hurricane rebuilding works, provided some support to the construction sector. In price developments, domestic inflationary pressures remained subdued over the review period, although the recent uptick in international oil prices contributed to a firming in the rate.
Preliminary data for the first quarter of FY2021/22 revealed that the Government’s overall deficit narrowed vis-à-vis the same quarter of FY2020/21. The outturn was underpinned by a rise in total revenue, attributed to a rebound in value added tax (VAT) collections, which outstripped the growth in aggregate expenditure. Budgetary financing was primarily sourced from the domestic market, and comprised a combination of short and long-term debt.
In monetary developments, the growth in domestic credit outpaced the rise in the deposit base, during the review quarter. Nevertheless, both bank liquidity and external reserves increased, bolstered largely by the receipt of Special Drawing Rights (SDRs) from the International Monetary Fund (IMF). Further, banks’ credit quality indicators registered a marginal improvement during the third quarter, on account of a reduction in non-accrual loans, which overshadowed the rise in short-term arrears. In addition, the latest available data for the second quarter of 2021 indicated that banks’ overall profitability increased, due mainly to a significant decline in provisioning for bad debt.
In the external sector, the estimated current account deficit narrowed considerably during the third quarter, as the services account position reversed to a surplus from a deficit in the previous year, owing primarily to a rebound in tourism receipts. In contrast, the estimated surplus on the capital account decreased markedly, while the financial account inflows reduced notably, explained by a decline in “other” investment inflows, due to a reduction in net currency and deposit liabilities.
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