Bank loan delinquencies have declined by more than $45 million over the last nine months, with the ratio of arrears to total loans falling to 18.6 percent. According to the latest report from the Central Bank of The Bahamas, this decline in delinquencies was mostly due to a reduction in the short-term segment, which fell by more than $66 million. Not surprisingly, financial institutions continued to invest considerably in provisions. That segment went up $44.1 million, or 14.7 percent, since January of this year. The ratio of provisions to total arrears and non-performing loans rose by 4.8 percent and 4.4 percent, coming in at 29.6 percent and 41.2 percent respectively.
Commercial delinquencies fell the most during this period, according to the report. For the nine-month period it declined almost $41 million. That was mirrored, in turn, by a $14.3 million fall on consumer loan arrears. "Conversely, as borrowers remained challenged in meeting their monthly debt obligations, total mortgage loan arrears advanced by $9.9 million (1.5 percent) to $659.9 million, with the $31.5 million (seven percent) growth in non-performing loans, eclipsing the $21.6 million (10.8 percent) reduction in short-term arrears," the Central Bank noted. Late last month, State Minister of Finance Michael Halkitis said the government's Mortgage Relief Plan had received jut 369 applicants. The plan is expected to have a marginal impact on mortgage loans both from a consumer and government perspective.
"We are going to look at them and see how many will be approved," Halkitis said. When comparing September 2012 to the same period last year, there were major declines in arrears across the board, including a 19.6 percent reduction in commercial delinquencies and a 3.2 percent fall in consumer and mortgage arrears. Banks wrote off a total of $24.4 million in loans in September 2012. In regards to the government fiscal position, the situation was less optimistic. The overall deficit widened by $27 million to $81.8 million in September. Expenditure increased considerably that month, according to the report, coming in at $285.8 million.
That overshadowed an 8.5 percent increase in total revenue to $204.3 million. Tax collections improved by nearly 10 percent during this period, primarily due to gains in international trade taxes, although that was balanced with a near five percent decline in non-tax revenue. "Under outlays, capital expenditure more than doubled to $39.1 million, underpinned by a two-fold hike in infrastructure spending to $35.5 million and a slight $1.9 million rise in asset acquisitions," the report stated. Indeed, ongoing projects such as the controversial roadworks should continue to burden the public purse.
Turning to the country's main industry, tourism showed modest gains in September due to an improvement in occupancy rates. That said, the average daily room rate has been challenged as stakeholders seek to attract more tourists. The Central Bank expects "marginal" growth to continue in 2012 and into 2013. Foreign-direct investment is considered a main driver of the economy going forward, although job creation is seen as mostly temporary. "Fiscal developments are expected to remain challenged by the softness in the economy, thereby constraining the pace of improvement in the deficit and corresponding debt-to-GDP radio," the report concluded.
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