The troubles at Baha Mar continue to loom large in The Central Bank of The Bahamas (CBOB) forecasts. The bank has just released its Monthly Economic and Financial Developments report for August 2015, and notes in its “Outlook and Policy Implications” statement that “near-term estimates for economic growth and employment have been tempered by the extended delays relating to the completion of the multibillion- dollar Baha Mar development — which prompted a credit downgrade by one international agency.”

Still, the bank expected that what it termed “the mild growth” noted during the first half of the year will continue to be supported over the remainder of 2015, by the ongoing strengthening in several key tourism markets and the impact of a number of varied-scale foreign investment projects.

Domestic inflation, which saw a bit of a bump in the first half of the year, is poised to remain relatively mild, the bank says, as the initial impact of the VAT levels off and global oil prices remain close to historic lows.

The bank maintained its optimistic view, suggesting that the economy maintained a “mildly positive growth momentum during the review period, supported by the healthy performance of the long-stay segment of the tourist sector, alongside several varied-scale foreign direct investment projects which braced construction activity.”

Still, the bank noted data from the Ministry of Tourism for the seven months of 2015 which showed total visitor arrivals contracting marginally, by 1.0 percent to 3.8 million, relative to 2014’s 2.9 percent expansion.

“However, in a continuation of the strengthening observed since January, 2014, the high value-added air segment firmed by 5.0 percent to 0.9 million, outpacing the 2.8 percent gain recorded in the prior period. Meanwhile, last year’s 2.9 percent upturn in the dominant sea component was reversed to a 2.7 percent decline, for a total of 2.9 million visitors,” CBOB said.

Tourism

Drilling down into the tourism numbers, the bank noted that arrivals to New Providence decreased by 9.5 percent to 2.0 million, vis-à- vis a 1.8 percent advance in the corresponding period of 2014. This outturn reflected a sharp 13.9 percent reduction in sea passengers, which eclipsed the 1.2 percent gain in the air segment.

In contrast, the number of visitors to Grand Bahama surged by 30.5 percent to 0.6 million, a rebound from the previous year’s 8.2 percent falloff, as increases in both hotel and airlift capacity boosted air arrivals by 27.4 percent, and the dominant sea component improved by 31.1 percent.

“Buoyed by respective gains in air and sea passengers, of 9.5 percent and 1.3 percent, visitors to the Family Islands rose further, by 2.3 percent to 1.2 million, following the year-earlier 10.1 percent expansion—aided by the start-up of a new mid-sized resort operation.

“Provisional hotel sector data from the Ministry of Tourism and the Bahamas Hotel and Tourism Association, for the January to July period, confirmed the sustained rebound in tourism output relative to the same period of 2014. Total room revenue rose by 4.0 percent, based on increases in the average occupancy rate, of 4.3 percentage points to 75.9 percent, and the average daily room rate (ADR), of 6.7 percent ($16.82) to $268.36,” the bank reported.

Inflation

The bank reported that domestic inflation for the twelve months to June, as measured by the All Bahamas Retail Price Index, advanced to 1.41 percent, from 0.87 percent in the previous year.

The bank cited average price gains for recreation and culture, health, education, alcohol beverages, tobacco and narcotics, communication and food and non-alcoholic beverages. Similarly, average prices for furnishing, household equipment & maintenance, and housing, water, gas electricity and other fuels — the most heavily weighted component in the index — were up.

In contrast, inflation slowed for miscellaneous goods and services, restaurant and hotels and clothing and footwear and fell for transportation.

CBOB also noted that amid the protracted decline in global oil prices over the last twelve months, average gasoline costs decreased by 2.0 percent in August, on a monthly basis, and by 26.5 percent relative to the prior year, to $4.02 per gallon. The average cost of diesel also moved lower, by 2.7 percent to $4.75 per gallon, over the month and by 6.3 percent, year-on-year. A similar outcome was observed for the domestic fuel charge, which decreased by 1.5 percent over July’s rate and fell sharply by 36.4 percent vis-à-vis August 2014, to 15.49 cents per kilowatt hour (kWh).

Domestic monetary trends

The bank reported that private sector loan arrears rose in August by $10.1 million (0.8 percent) to $1.2 billion and by 10 basis points to 20.1 percent of total loans. The increase in delinquencies was concentrated in the short-term, 31-90 day segment, which firmed by $13.8 million (4.8 percent) to $303.9 million, raising the corresponding loan ratio by 21 basis points to 5.1 percent.

In contrast, non- performing loans fell by $3.7 million (0.4 percent) to $905.0 million and by 11 basis points to 15.0 percent of total private sector loans.

According to CBOB, the consumer and mortgage segments led the rise in total delinquencies, swelling by $11.6 million (3.9 percent) and by $11.1 million (1.7 percent) to $309.6 million and $671.9 million, respectively.

“For consumer loans, the outcome reflected gains in both short-term and non- performing loans, of $6.5 million (7.2 percent) and $5.1 million (2.5 percent), respectively, while the mortgage component was associated with a $9.4 million (6.1 percent) expansion in 31-90 day arrears, alongside a more muted $1.7 million (0.3 percent) gain in the non-performing segment.

“In contrast, commercial delinquencies improved by $12.7 million (5.3 percent) to $227.4 million, due to respective declines in the non-accrual and short-term components, of $10.6 million (5.4 percent) and $2.1 million (4.7 percent).

In line with the growth in arrears, banks increased their total provisions for loan losses by $6.5 million (1.3 percent) to $524.0 million. Consequently, the ratio of provisions to arrears expanded by 18 basis points to 43.3 percent and the corresponding non-performing loan ratio was higher by 95 basis points at 57.9 percent. Total write-offs for the month approximated $4.6 million, while recoveries amounted to $2.0 million.

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