NASSAU, Bahamas – The Central Bank of the Bahamas (CBB) says preliminary indications are that during the month of January, the domestic economy sustained its growth momentum, although at a more tempered pace, with economic indicators returning closer to their expected medium-term potential.
In its outlook for the domestic economy, the CBB said that as the economy converges closer to its medium-term growth potential, the domestic economy is anticipated to expand at a moderated pace in 2024, supported by ongoing gains in the tourism industry and other areas of the real sector.
“However, the downside risks to tourism persist, related mainly to exogenous factors, such as geopolitical tensions and heightened global oil prices, which could disrupt travel sector activity.
“Moreover, the resumption in 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 stimuli to the construction sector, and by extension, contribute to economic growth,” the CBB said in its “Monthly Economic and Financial Developments (MEFD) January 2024,” report released on Monday.
It said in the labour market, employment conditions are forecasted to improve, with additional job gains concentrated largely in the construction and tourism sectors. In price developments, inflation is projected to continue to trend downward, as improvements in global oil prices persist.
“Nonetheless, upside risks to inflation revolves around uncertainty in global oil prices and supply chain shortages, related to geopolitical tensions in Eastern Europe and the Middle East.”
On the fiscal front, the government’s net financing gap is anticipated to trend further downwards. The expected recovery in revenue remains significantly linked to tourism-led improving trends in taxable economic activities.
“As a consequence, the estimated budgetary gap is anticipated to require a combination of domestic and external borrowings, but with an increased proportion of the total funding from domestic sources. “
In its report examining the performance of the country in January, the CBB said tourism output continued to register healthy growth, bolstered by gains in both the high value-added air segment and the sea component, as the demand for travel in key source markets persisted, amid aggressive marketing of the destination.
It said the average consumer price inflation, as measured by changes in the average Retail Price Index (RPI) for The Bahamas, moderated in 2023, as the rise in international oil prices slowed, relative to the same period last year.
“Monetary trends for January were marked by an expansion in banking sector liquidity, on account of a buildup in the deposit base, which contrasted with the reduction in domestic credit. Similarly, external reserves grew, largely attributed to the Government’s external borrowing activities,” the CBB said.
It said tourism metrics for the month of January suggest that the sector maintained its growth trajectory, undergirded by ongoing gains in both the high-value added air segment and sea passengers, as the demand for travel in key source markets persisted.
Official data provided by the Ministry of Tourism showed that total visitor arrivals rose to one million in December 2023, from 0.9 million in the comparative period of 2022.
“Specifically, the dominant sea segment increased to 0.85 million visitors, from 0.75 million passengers in the previous year. Further, the value-added air component grew to 0.16 million visitors, the same magnitude as the prior year,” the CBB added.
It said on an annual basis, total arrivals strengthened to a historic 9.6 million visitors in 2023, vis-à-vis seven million in the 2022 period.
Contributing to this outcome, air arrivals advanced to 1.7 million passengers, from 1.5 million in the prior year, extending the 65.8 per cent gain in the previous year, reflective of increases in all major markets. Likewise, sea arrivals accelerated to 7.9 million, from 5.5 million visitors in the preceding year.
Data provided by AirDNA on the short-term vacation rental market showed that in January, total room nights sold declined by 6.9 per cent to 137,479 from a year earlier. Correspondingly, the occupancy rates for both entire place and hotel comparable listings decreased to 47.8 and 47.9 per cent, respectively, compared to 56.6 and 55.7 per cent in the prior year.
Further, price indicators showed that year-over-year, the average daily room rate (ADR) for entire place listings decreased by 5.3 per cent to US$496.86. In contrast, the ADR for hotel comparable listings increased by 1.1 per cent to US$188.59, the CBB added.
It said that the average domestic consumer price inflation, as measured by the All Bahamas Retail Price Index, slowed to 3.1 per cent in 2023, from 5.6 per cent in 2022, as the rise in international oil prices moderated, as compared with the previous year.
During the month of January, the CBB said monetary trends featured an expansion in banking sector liquidity, as the growth in the deposit base, contrasted with the reduction in domestic credit.
“Specifically, excess reserves—a narrow measure of liquidity—increased by US240.1 million to US$2,107.2 million, extending the US$24.6 million gain a year earlier. Similarly, excess liquid assets—a broad measure of liquidity—rose by US204.4 million to US$3,088.6 million, surpassing the US$26.4 million accumulation in the previous year.”
During the review period, external reserves grew by US$38 million to US$2,731.2 million, a turnaround from last year’s US$4.7 million decline, owing largely to the receipt of proceeds from the Government’s external borrowing activity.
“Reflective of this development, the Central Bank’s net foreign transactions with the public sector switched to a net inflow of US$272.3 million, from a net outflow of US$38 million in the comparable 2023 period.
“In addition, the Central Bank’s net purchase from commercial banks widened to US$87 million, from US8.3 million in the year prior. Further, commercial banks’ net purchases from their customers registered US$73.5 million from an almost flat position in the preceding year,” the CBB reported.
