The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar’s construction completion will cost some $400 million, the Central Bank said last night, with around 95 per cent of the project’s full-time employees to be Bahamian.

The regulator, in its December economic developments update, said a total $700 million investment is required to complete and open Baha Mar, inclusive of construction costs.

It said the project’s prospective new owner, Chow Tai Fook Enterprises (CTFE), planned to invest $200 million in redeveloping the 15-acre site of the former Crystal Palace casino and Wyndham resort properties.

And, as confirmed by Graeme Davis, CTFE (Bahamas) president, the Hong Kong-based conglomerate will inject a further $100 million to fund Baha Mar pre-opening, recruitment and temporary support costs.

The Central Bank said $3.5 billion had been invested in Baha Mar to-date which, when added to the $700 million estimate, affirms Tribune Business projections from 2015 that the project was set to cost at least $4 billion to open.

The $3.5 billion figure also likely includes the $800-$900 million in equity that was invested by original developer, Sarkis Izmirlian, and his family - an investment that has now effectively been wiped out following Baha Mar’s receivership/liquidation and now sale.

The Central Bank, meanwhile, said around 95 per cent of employees will be Bahamian once Baha Mar reaches its “full complement” of 5,500 to 7,000 jobs.

It also forecast that the project’s opening would generate a 19 per cent boost in stopover visitor arrivals to the Bahamas in 2017, generating “approximately 315,000 additional air passenger guests”.

However, the Central Bank projections are likely better suited to 2018, given CTFE’s plans to gradually open and ramp up Baha Mar operations throughout the course of 2017. The SLS and Rosewood properties are not due to open until December 2017.

Still, Baha Mar is key to the Central Bank’s prediction that a “modestly stronger economic performance is expected in 2017”.

“Expectations are that the domestic economy will perform at a healthier pace in 2017, reflecting the impact of the phased opening of the Baha Mar resort, other hotel sector capacity growth and varied-scale ongoing foreign investment projects, while rebuilding efforts after Hurricane Matthew will continue to provide a strong stimulus to the construction sector,” the Central Bank said.

“As a consequence, employment conditions should improve further. Inflation is anticipated to remain relatively low during the year; however, the recent uptrend in global oil prices may sustain the on-going rise in domestic energy costs.”

Elsewhere, total Bahamian commercial banking loan arrears fell by $209 million or 17.1 per cent in 2016, aided heavily by one bank’s sale of a large chunk of its non-performing loan portfolio.

“A breakdown by average age of delinquencies showed that non-performing loans contracted by $177.5 million (19.6 per cent), with the attendant ratio decreasing by 2.8 percentage points to 12.3 per cent,” the Central Bank said.

“Similarly, short-term arrears declined by $31.5 million (10.1 per cent), resulting in the ratio falling by 46 basis points to 4.8 per cent.”

Mortgage loan arrears declined by $176.2 million, with the non-performing and short-term arrears segments declining by $150.6 million and $25.5 million, respectively.

However, this appears not to have inspired Bahamas-based commercial banks to increase their lending, as excess (surplus) liquid assets ended 2016 at $1.447 billion, having risen by $132.67 million during last year.

And other Central Bank data pointed to the increasing trend of banks focusing on consumer loans, diverting credit away from the economy’s productive sectors, namely the housing market (mortgages) and business loans.

Total private sector credit, which accounts for 69.1 per cent of all outstanding loans, fell by $92.4 million in 2016 - a rate that increased compared to the prior year’s $24.1 million fall.

While consumer lending to individual Bahamians and households increased by $78.6 million in 2016, mortgage and commercial credit dropped by $111.9 million and $59.1 million, respectively.

Meanwhile, the Bahamas’ foreign currency reserves expanded by $93.6 million during 2016 to close the year at $902.1 million, up from the $22.2 million expansion in 2015.

However, while the 2016 year-end figure was equivalent to 3.9 months’ worth of imports, above the international benchmark of three months, the Central Bank acknowledged that this had been boasted by the Government’s external borrowings.

“Indications are that tourism activity improved modestly during December, benefiting from several sporting events and the winter holiday season,” the Central Bank added. “Specifically, data from the Nassau Airport Development company (NAD) revealed that passenger traffic through the country’s main airport - net of domestic departures - grew by 4.1 per cent in December year-on-year, a reversal from a 0.9 per cent reduction in the previous month.

“A breakdown by category, showed that the dominant US component firmed by 5.7 per cent, outpacing the 0.6 per cent growth in November. In contrast, departures to non-US countries softened by 4.2 per cent, following an 8.8 per cent contraction in the prior period.

“Similar trends were noted over the entire year, as total departures firmed by 1 per cent when compared to 2015, due mainly to the high volume US segment firming by 1.9 per cent. However, non- US departures declined by 4.1 per cent.”