NASSAU, Bahamas – The Central Bank of the Bahamas (CBB) says as indicators move closer toward their medium-term growth potential, the domestic economy is expected to expand at a moderated pace in 2024.
It said that the growth is bolstered by ongoing gains in the tourism industry and other areas of the real sector.
“In addition, new and on-going foreign investment projects are anticipated to provide support to the construction sector and aid economic growth,” the CBB said in its Monthly Economic and Financial Developments (MEFD) for the month of April.
“However, downside risks to tourism remain, predominantly related to exogenous factors, such as geopolitical tensions and heightened global oil prices, which could disrupt travel sector activity. Moreover, the resumption of counter-inflation policies by major central banks could reduce the travel spending capacity of key source market consumers,” the CBB said.
It said with regards to the labour market, employment conditions are expected to continue to improve, with additional job gains primarily in the construction and tourism sectors.
In terms of prices, inflation is projected to maintain its downward trajectory, as global oil prices taper off, with the CBB noting that nevertheless, upside risks to inflation revolve around global oil price uncertainty and supply chain shortages, in relation to geopolitical tensions in Eastern Europe and the Middle East.
The central bank said that on the fiscal front, the government’s net financing gap is expected to maintain its downward trend.
It said further, the anticipated recovery in revenue remains significantly linked to tourism-led improving trends in taxable economic activities.
“On a net basis, financing of the estimated budgetary gap is further sustainable in domestic currency, albeit a combination of domestic and external borrowing should continue to support gross refinancing operations.
The CBB said that monetary sector developments will continue to feature elevated levels of banking sector liquidity, as commercial banks maintain their conservative lending stance. Nevertheless, the environment should encourage a rise in lending to the private sector.
“Further, external reserves are forecasted to remain robust for the rest of year, although a modest reduction is likely, given the anticipated growth in domestic credit. Nonetheless, external balances should remain more than sufficient to maintain the Bahamian dollar currency peg, while foreign exchange market conditions are projected to stay at healthy levels, supported by tourism inflows and other private sector activities.”
The CBB said that in response to the prevailing outlook, it will maintain its accommodative policy stance for private sector credit, and pursue policies that ensure a favourable outturn for external reserves and financial stability.
“Additionally, the Bank will continue to monitor developments within the foreign exchange market, with the aim to implement appropriate measures to support a positive outcome for the foreign reserves.”
The CBB said that overall economic activity during the month of April, indications are that the domestic economy’s growth trajectory persisted, albeit at a slower pace in comparison to the previous year, as economic indicators continued to converge closer to their expected medium-term potential.
It said tourism output remained buoyant, bolstered by healthy expenditure paced gains in the high value-added air traffic component and further growth in sea passengers, undergirded by the ongoing demand for travel in key source markets.
Tourism Initial data revealed that the tourism sector continued to register healthy gains during the review month. This reflected expected expenditure paced strength in the high value added air segment and expanded volume in the sea component, due to sustained demand for travel in key source markets and ongoing marketing efforts.
Official figures provided by the Ministry of Tourism indicated that total visitor arrivals rose to 0.91 million in April, compared to 0.87 million a year earlier. The dominant sea segment firmed to 0.75 million visitors, from 0.69 million passengers in the comparative 2023 period. However, the high value-added air component edged down to 0.16 million visitors, from 0.17 million in the prior year.
In the short-term vacation rental market, data provided by AirDNA showed that in April, total room nights sold declined by 5.5 er cent, to 53,588, when compared to the same period last year.
Correspondingly, the occupancy rate for entire place listings reduced to 47.9 per cent from 56.4 per cent a year earlier, while the occupancy rate for hotel comparable listings decreased to 45.8 per cent, from 53.5 per cent in 2023.
Meanwhile, price indicators revealed that the average daily room rate (ADR) for both entire place and hotel comparable listings moved higher by 3.8 per cent and by 5.5 per cent to US$692.54 and US$197.02, respectively.
The CBB said that monetary trends for the month of April were marked by a buildup in bank liquidity, despite the reduction in domestic credit trailing the falloff in the deposit base.
It said further, external reserves increased, largely attributed to net foreign currency inflows from the private sector.
It said that liquidity monetary trends for the month of April were marked by an expansion in the narrow measure of banking sector liquidity, despite the contraction in the deposit base, outpacing the reduction in domestic credit.
In particular, excess reserves – a narrow measure of liquidity – rose by US$95.5 million to US$2,268.4 million, exceeding the US$16.7 million accumulation a year earlier. In contrast, excess liquid assets, a broad measure of liquidity, decreased by US$13.4 million to US$3,208.6 million, a switch from a $6.9 million uptick in the previous year.
During the month of April, external reserves grew by US$70.2 million to US$2,968.3 million, extending last year’s US$12.7 million gain.
The CBB said its net sales to the public sector moderated to US$61.8 million from US$117.1 million in 2023.
“This more than cushioned the reduced purchases from commercial banks, to US$118.1 million, from US$127.4 million in the preceding year. Further, commercial banks’ net intake from their customers reduced to US$87.6 million from US$104.2 million in the same period last year,” the CBB added.
The bank said that total Bahamian dollar credit fell by US$41.7 million in April, a switch from a US$130.8 million expansion in the previous year.
