The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

THE Bahamas’s tourism sector showed “signs of softness” over the first quarter of 2016 the Central Bank has revealed, with total room revenue falling approximately five per cent over the previous year.

The regulator’s April report on monthly economic developments noted that preliminary data from the Bahamas Hotel and Tourism Association (BHTA) “showed signs of softness in the tourism sector’s performance indicators over the first quarter, as total room revenue fell by approximately five per cent relative to the previous year. This outturn reflected contractions in both the hotel occupancy rate and the average daily room rate (ADR) by 2.0 percentage points to 73.7 per cent and by 3.7 per cent ($10.46) to $275.33, respectively.”

According to the Central Bank, initial evidence suggests that domestic economic activity remained subdued during the review period, reflecting the weakness in tourism output, while construction sector developments continued to be underpinned by tourism-related foreign investment projects. “Domestic energy costs remained below the previous year’s level, reflecting the downward trend in international oil prices. In the monetary sector, both bank liquidity and external reserves firmed in April, due mainly to net foreign currency inflows from real sector activities,” the Central Bank reported.

The Central Bank said that it expects that the domestic economy will register “only marginal gains” this year following a construction-led contraction in output in 2015. “This development should reflect a modest improvement in the tourism sector, amid ongoing growth in key source markets, additional airlift and cultural initiatives, while activity in the construction sector should be supported by several foreign investment projects in both the capital and the Family Islands.”

During his 2016/2017 budget contribution Prime Minister Perry Christie noted that since his administration came into office in 2012, the Bahamas has succeeded in securing significant capital commitments of $7.8 billion in foreign direct investment, delivering an additional 1,500 hotel rooms and 300 high-end estate homes and villas in resort inventory over the next decade. He noted that just over $1.3 billion in new capital projects have been tabled and are currently in active phases of development, with launches slated for the fiscal period 2016/2017, which he said demonstrates the continued confidence of international investors.

The Central Bank noted that fiscal sector developments will continue to be dominated by the receipt of revenues from the Value Added Tax (VAT), which should result in further gains in tax collections and, in combination with measures to restrain expenditure growth, lead to a decline in the deficit. “With credit to the private sector poised to remain subdued due to the high level of loan delinquencies and banks’ conservative lending stance, expectations are that liquidity will remain elevated. In addition, banks should remain well capitalised, thereby mitigating any financial stability concerns. The outlook for external reserves will depend heavily on the balance between the inflow of foreign exchange from real sector activities, as well as one-off receipts and the demand for foreign currency to facilitate current payments - such as fuel imports.”