By NEIL HARTNELL
Tribune Business Editor
THE Government last night released preliminary estimates showing the Bahamian economy's gross domestic product (GDP) expanded by 1.6 per cent in 2011, based on constant prices, despite household spending decreasing by 2 per cent.
The data, drawn up by the Department of Statistics, also disclosed that gross capital formation - investment in buildings, machinery and infrastructure - recovered sharply in 2011, growing by $221 million.
The Government release took great pains to explain the differences between GDP measured in current prices, which factors in inflation, and constant prices that measure the value of goods and services using prices from that particular year.
For 2011, the current prices measurement of Bahamian GDP (accounting for inflation), was 0.2 per cent, while the constant prices measurement was 1.6 per cent. The Government said the latter was used for comparing GDP performance with that of past years.
Looking back, the Government report noted that private consumption/household spending feel sharply under both measurements in 2009, due to job losses, reduced disposable income and a worldwide recession.
"In 2010, household current expenditure increased by 4 per cent, while at constant prices the increase was slightly smaller at 1 per cent," the Government said. "This was due to a slight recovery of a few jobs, some being employed with the Government's road improvement program, construction on the Airport Project, the dredging and expansion of the harbour, refurbishment of Saunders Beach and of the Government tourism complex. Householders also substituted lost earnings by becoming self-employed with informal businesses.
"In 2011, household expenditure at current prices grew by 2 per cent. This was slightly lower than the growth in 2010, in spite of the continued construction projects such as the Baha Mar resort, the Airport Project and other projects.
"The positive effect of that economic activity was mitigated by higher unemployment in Grand Bahama and the loss of revenue for local businesses and the informal sector that were negatively impacted by the New Providence Road Development Project."
And the Government added: "The household expenditure at constant prices for 2011 also showed a slight decrease of 2 per cent when deflated using the Consumer Price All Items Index, which increased from 110.02 in 2010 to 113.36 in 2011."
The Government added that gross capital formation values were obtained from a combination of materials and labour used on various construction and investment projects.
"In 2010 current prices, this investment decreased by $78 million, led by decreases in residential and non-residential construction, capital-work-in-progress and machinery and transport equipment," the Government said.
"This decrease is supported by data on mortgage commitments obtained from the Central Bank February 2012 report, which showed that in 2010 the residential mortgage commitments fell by $73 million, and commercial mortgage commitments by $36 million. Construction services imported also showed a decline of $5 million in 2010, and machinery and transportation equipment decreased by $56 million.
"Gross Capital Formation, however, made a significant recovery in 2011, growing by $221 million, led by increases in machinery and transport equipment of $44 million and non-residential construction of $209 million (a major item of which is construction services imported, which itself grew by $147 million)."