More ‘upward trajectory’ for Bahamas economy, says Central Bank

More ‘upward trajectory’ for Bahamas economy, says Central Bank
The Central Bank of The Bahamas. (PHOTO: CBOB)

NASSAU, BAHAMAS – The Bahamas’ economy is expected to sustain its “upward trajectory” over the near-term, with the majority of gains projected to accrue from improved tourism figures, according to The Central Bank of The Bahamas.

According to the bank’s latest Monthly Economic and Financial Developments (MEFD) report for April, the tourism sector remained buoyant over the review period with sustained gains in both the high value-added air arrivals and cruise visitors.

The most recent data from the Ministry of Tourism showed that total visitor arrivals advanced by 5.9 percent in March, outpacing the 3.6 percent gains recorded in the same month the previous year.

Cruise visitors increased by 4.6 percent in March after a decline of 2.5 percent last March. Meanwhile, the growth in air arrivals slowed to 9.5 percent from the 26.1 percent growth in 2018 that month.

This was due in part to the late start to the Easter holiday period.

For the quarter, air arrivals to The Bahamas remained strong with an increase of 17.3 percent.

“In addition, a number of varied-scale foreign investment projects, in both capital and the Family Islands, will continue will continue to underpin construction sector activity,” read the report.

“Against this backdrop, employment in anticipated to gradually increase, although labour force gains from the return of previously discouraged workers and new entrants could constrain the response of the jobless rate.

“Domestic inflation is expected to remain relatively subdued, however, a modestly higher rate could persist over the near-term reflecting the pass-through effects from the hike in the VAT rate and the rise in global oil prices.

The report also noted that the government’s success in narrowing the fiscal deficit and debt indicators will remain contingent on the “effectiveness of measures to enhance revenue administration, and curtail expenditure growth”.

In his budget communication, Minister of Finance Peter Turnquest said a ministry by ministry analysis of actual government expenditure compared to budgetary allocations revealed a “historical pattern of over-budgeting”.

He also said there were numerous cases of agencies not spending all of their allocations, and on average most agency spent approximately 70 percent of their budgets.

The finance minister indicated that the 2019/2020 budget reflects a surgical trimming of the budget to decrease fiscal inefficiencies and reverse the pattern of improper planning resulting from overbudgeting with little outcomes.

In the upcoming budget, the government has reduced recurrent expenditure from $2.589 billion in 2018/2019 to $2.53 billion. It also projects to bring down the GFS deficit from $237 million to $137 million.

For the first nine months of the current fiscal year, the government narrowed its deficit by $132.5 million period over period — from $262 million in the first nine months of 2017/2018 to $129.5 million during the period this year.

This was largely the result in the increase in revenue, which was largely attributed to the increase in value-added tax (VAT) from 7.5 percent to 12 percent in July 2018.

During the nine-month period, revenue increased by $219.2 million compared to the same period in the previous fiscal year.

The government’s increase in in subsidies for healthcare, social assistance benefits, pensions and gratuities, as well as interest payments on external debt, said recurrent spending increase by $143.5 million during the period to $1.69 billion.

The bank said it will continue to monitor the downside risks to the economy, including concerns that the ongoing trade disputes between the United States and other major markets could restrain global economic activity and potentially lead to higher inflation rates.