The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Government appears to have posted a small $7 million Budget surplus for January, with the deficit for the first seven months of 2017-2018 pegged at $191.3 million - a 39 per cent drop.

The Central Bank of the Bahamas' economic report for February thus suggests that the year-to-date deficit has narrowed slightly from the $198 million referred to in the Deputy Prime Minister's mid-year Budget presentation, although it is unclear whether its accounting basis and figures are the same as those used by the Government.

The Central Bank, which tends to employ 'cash accounting', said: "Data on the Government's budgetary operations for the seven months of fiscal year 2017-2018 revealed a $123.4 million (39.2 per cent) reduction in the deficit to $191.3 million, compared to the corresponding period of fiscal year 2016-2017.

"This outcome reflected a $102.4 million (7.6 per cent) contraction in total expenditure to $1.251 billion, along with a $21 million (2 per cent) expansion in aggregate revenue to $1.060 billion."

The deficit comparatives are up against weak 'year before' figures that were impacted by Hurricane Matthew's aftermath, although they do not yet reflect the pre-election spending spree and commitments embarked upon by the former Christie administration. The Central Bank's numbers also reveal that the year-over-year spending reduction was achieved largely by cuts in the Government's capital Budget, as previously noted by K P Turnquest, which is much easier to accomplish than eating into fixed costs such as the $753 million civil service wage bill not to mention accompanying benefits.

"The expenditure outcome was dominated by a $92.3 million (53 per cent) reduction in capital outlays to $82 million," the Central Bank said, "led by a halving in infrastructure spending to $68.2 million, following a hurricane rebuilding-related expansion in the prior year, while asset acquisitions narrowed by $22.2 million (61.7 per cent) to $13.8 million.

"Similarly, current expenditure decreased by $9.9 million (0.8 per cent) to $1.17 billion, due mainly to a reduction in transfer payments by $35 million (6 per cent) to $545.9 million. In particular, subsidies and other transfers decreased by $42.9 million (10.4 per cent), owing mainly to a $36.8 million (18.1 per cent) decline in healthcare-related subsidies."

The Government has itself acknowledged that continued cuts to its capital budget cannot be sustained, as it deprives much-needed infrastructure upgrades of cash and restricts projects that create long-term value for the Bahamian people.

"Interest payments firmed by $7.9 million (4.7 per cent), amid gains in both internal and external repayment obligations," the Central Bank added of the Government's ongoing fiscal pressures. "Further, consumption spending rose by $25 million (4.2 per cent) to $623.6 million, with personal emoluments higher by $23.2 million (5.7 per cent).

"The growth in aggregate revenue was led by an $11 million (10.4 per cent) increase in non-tax receipts to $116.2 million, as proceeds from fines, forfeitures and administration fees rose by $11.5 million (14 per cent).

"Similarly, tax revenue expanded by $10 million (1.1 per cent) to $943.9 million, reflecting a $21.4 million (10.6 per cent) advance in 'other miscellaneous' taxes, inclusive of a $6.6 million (58.7 per cent) increase in motor vehicle tax inflows," the report continued.

"Further, Value-Added Tax (VAT) receipts grew by $8.4 million (2.2 per cent) to $382.2 million, while the $2.3 million (15.6 per cent) gain in selective taxes on services to $16.9 million, was buoyed by a $3.4 million (25 per cent) uptick in gaming tax receipts. In contrast, timing-related factors led to business and professional fee receipts decreasing by $16.2 million (36.8 per cent) to $27.8 million, while taxes on international trade contracted by $5.8 million (1.9 per cent) to $293.9 million, due to reduced collections on import duties."

As for the real economy, the Central Bank said early 2018 tourism numbers suggested "a rebound in activity" following "a challenging 2017", as Baha Mar's opening and the return of refurbished inventory at Atlantis, the RIU and Warwick buoyed the resort sector.

"Of particular note was the strengthening in onshore activity in New Providence and the Family Islands," the Central Bank said. "Preliminary data from the Ministry of Tourism showed that visitor arrivals to the Bahamas firmed by 5 per cent to 0.5 million in January, vis-à-vis a 4.7 per cent contraction during the comparable period of the prior year.

"This reversal reflected gains in both air and sea visitors by 7 per cent and 4.6 per cent, relative to reductions of 1.6 per cent and 5.3 per cent, respectively, in 2017. In terms of the major markets, traffic to Grand Bahama strengthened by 44 per cent in January, a reversal from a 28 per cent decline in the prior year.

"This was due to a 52.4 per cent expansion in sea visitors, amid higher passenger volumes from two major cruise lines, overturning the 25.6 per cent reduction in 2017. However weakness persisted in the onshore market with a further 18.2 per cent decrease in air arrivals relative to a 41.9 per cent contraction in 2017," the report continued.

"In New Providence, growth slowed by 2.4 percentage points to 1.6 per cent, as the dominant sea segment fell by 0.3 per cent, a reversal from last year's 5.5 per cent gain. Nevertheless, the high value-added air component advanced by 7.9 per cent, vis-à-vis a 0.6 per cent softening in the prior year.

"Further, Family Island arrivals decreased by 1.4 per cent following a 9.7 per cent contraction a year earlier, as sea traffic fell by 3.1 per cent after a 12.8 per cent reduction in the prior period. However, air arrivals expanded by 11.8 per cent, following a 23.8 per cent increase in 2017."

The Central Bank added that initial data from the Nassau Airport Development Company (NAD) showed an 11.2 per cent rise in visitor departures compared to an 8.4 per cent reduction in the same period in 2017.

"Gains were recorded for both US and non-US passenger departures of 9.6 per cent and 18.4 per cent, in contrast to respective declines of 9.2 per cent and 4.5 per cent recorded in the prior year," it said of NAD's figures.