NASSAU, BAHAMAS — The Central Bank is projecting that the Bahamian economy will sustain its growth momentum throughout 2023, largely bolstered by substantial increases in tourism output.
Nevertheless, it is foreseen that the expansion rate will decelerate as various indicators gradually revert to their pre-pandemic levels. The Central Bank’s projections were outlined in its August Monthly Economic and Financial Developments report.
The regulator noted that additional downside risks to the tourism sector remain, mainly associated with exogenous factors, such as elevated global oil prices, which can potentially disrupt travel sector activity.
“Further, major central banks’ counter-inflation policies could curtail the travel spending capacity of key source market consumers. Nevertheless, new and ongoing foreign investment-led projects are expected to provide continued stimulus to the construction sector, which will contribute to the growth matrix,” said the Central Bank.
“In the labor market, the employment rate is forecasted to continue to improve, with additional job gains concentrated mainly in the construction and tourism sectors. As it relates to prices, inflation is projected to remain high in the near term, although trending downward over the medium to long term, with a lag, owing to moderating price trajectories in the major trading markets and delayed fuel cost pass-through in domestic energy prices. Upside risk to inflation revolves around uncertainty in international energy costs and supply chain shortages, associated with the geopolitical tensions in Eastern Europe.”
On the fiscal front, the Central Bank said that the Government’s net financing gap is anticipated to trend downwards as conditions become favorable for more consolidation.
“The recovery in revenue is projected to be significantly correlated to tourism-led improvements in taxable economic activities. Meanwhile, financing of the estimated budgetary gap is expected to require both domestic and external borrowings, though with an increased proportion of the total funding from domestic sources. Monetary sector developments will continue to feature high levels of banking sector liquidity as commercial banks sustain their conservative lending posture.
“In addition, external reserves are forecasted to remain buoyant in 2023, remaining above international benchmarks, supported by anticipated foreign currency inflows from tourism and other net private sector receipts. Consequently, external balances should remain more than adequate to maintain the Bahamian dollar currency peg,” it concluded.
The Central Bank’s projections come as Moody’s on Monday affirmed its support for the forecast of a three percent economic growth rate for The Bahamas in 2023.
