The Central Bank of The Bahamas (CBOB) has once again moderated its tone with respect to its outlook for the Bahamian economy. In its Monthly Economic and Financial Developments (MEFD) report for March 2016, the regulator noted that "economic conditions remained relatively subdued" over the first eight months of fiscal year (FY) 2015/2016.
The bank continued to underline the role that completing Baha Mar and getting it open for business would play in a much-needed economic revival.
"The domestic economy is expected to experience some growth over the year, underpinned by modest gains in tourism sector output and foreign investment-led construction activity. The completion of work on the Baha Mar project would elevate the current growth forecasts and positively affect employment conditions," the bank said, adding that it expects the deficit to sustain its downward trajectory, reflecting further value-added tax (VAT) led gains in revenue.
This, in combination with measures aimed at restraining expenditure growth, should result in an eventual improvement in the corresponding debt indicators, the bank projected.
The $3.5 billion Baha Mar megaresort went bankrupt in June 2015. It was put in provisional liquidation by the government of The Bahamas some months later, and in October 2015, it was put into receivership by the financier, the Export-Import Bank of China (CEXIM). CEXIM, through its receiver-manager Deloitte and Touche, has begun a search for bidders to buy the project. Developer Sarkis Izmirlian, through his companies BMD Ltd. and Granite Ventures Ltd., has continued to push his offer to buy out the bank, make the unsecured creditors whole and complete and open the resort.
Meanwhile, considering developments in the domestic economy, CBOB reported that preliminary economic indicators suggest that economic conditions remain relatively subdued over the review period, amid tempered tourism sector activity, while several varied-scale foreign investment projects support construction sector output.
Preliminary data from the Bahamas Hotel and Tourism Association and the Ministry of Tourism indicates that the tourism sector's performance was relatively weak over the first two months of the year, as total room revenue for a sample of hotels in New Providence decreased by nine percent. Reflecting this development, the average occupancy rate contracted by 2.3 percentage points to 68.2 percent and the average daily room rate fell by 7.2 percent to $248.69.
"There is potential for near-term improvement in the sector, as the hosting of a number of international events during the second quarter of the year, should provide impetus to the key stopover segment of the visitor market," CBOB said.
FY2015/16 YTD
The bank touted the VAT-led expansion - to the tune of 20.2 percent - in total government revenue receipts to $1.2 billion. Of that figure, tax revenue grew by 24.6 percent (to $1.06 billion) with VAT inflows totaling $423.7 million. The revenue intake eclipsed the $171.8 million (13.7 percent) upturn in expenditure to $1.4 billion. And the fiscal deficit narrowed by 10 percent to $242.7 million during the eight months of FY2015/16, relative to the corresponding period last year.
Meanwhile, the government has reclassified some of its expenditure, moving public corporations' subventions from net lending to transfers. Subsidies and other transfers grew by almost 50 percent, to $487.8 million. Also, increasing government debt drove interest payments up 8.1 percent to $170.7 million.
The bank reported that current outlays grew by $219.1 million (20.2 percent) to $1.3 billion over the review period; gains were also noted for spending on goods and services and wages and salaries by $34.9 million (20.7 percent) to $203.3 million, and $13.9 million (3.2 percent) to $443.5 million, respectively.
K. Quincy Parker, Guardian Business Editor
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