The Bahamian economy "stabilized somewhat" during November as foreign investment projects supported construction activity, and tourism registered a "modest improvement", the central bank has reported.
The Central Bank of The Bahamas has projected that the economy will show positive growth in the short term in light of improving economic conditions in key tourism source markets. Meanwhile, authorities expect "modest gains" in foreign investment activity to prove beneficial for employment levels.
"However, headwinds persist in the context of the still uncertain durability of the global recovery, the challenges to the tourism sector from intensified market competition and the elevated unemployment rate, which continues to limit the rebound in private sector demand and recovery in borrowers' ability to service their debt obligations.
Meanwhile, the outlook is for relatively subdued inflationary pressures --with the exception of the more volatile fuel component," notes the bank.
In its Monthly Economic and Financial Developments report for November, the central bank also found a worsening of credit quality indicators, with mortgage delinquencies leading the decline.
Mortgage delinquencies in particular rose by $18.7 million (2.7 per cent) over last year's corresponding figure to $713.5 million.
Banks increased loan loss provisioning by $7.7 million (1.8 per cent) to $441.6 million in November.
"Total private sector loan arrears increased by $23.5 million (1.8%) to a revised $1.3 billion, with the corresponding ratio of arrears to total loans firming by 36 basis points to 21.8 percent. In terms of the average age of delinquencies, short-term (31 to 90 day) arrears grew by $6.7 million (1.9 percent) to $370.5 million, up 10 basis points to six percent of total loans.
"Similarly, the non-performing category -- arrears over 90 days and on which banks have stopped accruing interest -- increased by $16.8 million (1.8 percent) to $972.1 million, corresponding to a 25 basis points rise in the loan ratio to 15.8 per cent."
Meanwhile, the bank also noted that the month of November saw a "significant" slowing in the growth of Bahamian dollar credit, with the growth in this area falling from the figure recorded in November of last year by $36 million to $5.4 million.
"In particular, the government's net obligations fell by $3 million, a reversal from last year's $41.8 million expansion, as short-term Bahamian dollar debt was liquidated. In contrast, credit to the rest of the public sector grew marginally by $1.7 million, vis-a?-vis a $7.3 million decline in 2012," notes the bank.
This movement with respect to credit to the public sector offset growth in private sector credit of $6.8 million. This was in line with the prior year's advance, as consumer credit strengthened by $7.4 million, outpacing 2012's $3.9 million increase, and commercial and other loans were reversed, from a $0.8 million decline to a gain of $2.2 million.
"In contrast, mortgages fell by $2.8 million, a turnaround from the prior year's $3.8 million expansion.
"Monetary developments over the near term are expected to be dominated by sustained high levels of bank liquidity, attributed to continued softness in consumer demand and banks' conservative lending practices. However, the seasonal increase in foreign currency demand during the holiday period is projected to continue to place downward pressure on external reserves, amid moderated real sector inflows," states the report.
The decline in external reserves was curtailed to $7.4 million from $39.1 million in the prior year, to an end-November balance of $677.5 million, mostly thanks to foreign currency borrowings by the government.

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