The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas’ economic recovery to-date has not been strong enough “ to achieve substantial gains in employment and a broadening of private sector demand”, the Central Bank noting that commercial bank loan arrears had almost hit the 20 per cent mark.

Confirming what most in the private sector already sensed and thought, the Central Bank’s August economic developments report concludes that while the Bahamian economy is headed in the right direction, boosted by tourism and construction related to Baha Mar and infrastructure projects, it is still not growing fast enough to make a broad-based difference.

Breaking down the Department of Statistics’ recent unemployment report, the Central Bank said that while the official jobless rate had declined by 1.2 percentage points to 14.7 per cent as at May 2012, this only translated into 3,145 new jobs created.

And, compared to May 2011, the Central Bank said the official unemployment rate had actually increased by one percentage point.

Giving a slightly more sober assessment of the Bahamian jobs outlook, the Central Bank said: “The underlying challenges in the labour market were also evident in the number of discouraged workers, which declined by 3 per cent over the six-month period but remained 9 per cent above May 2011’s level.

“With respect to the main labour markets, the unemployment rate in New Providence fell to 14 per cent from 15.1 per cent, and for Grand Bahama, to 17.3 per cent from 21.2 per cent.”

Thus the Central Bank appears to be on the same page as Standard & Poor`s (S&P) and James Smith, former minister of state for finance, who have all argued that the Bahamas is likely to be stuck with persistent high unemployment levels for some time.

With 41,000 Bahamians either unemployed or discouraged from seeking work, the 3,145 new jobs - while welcome - hardly put a huge dent in that figure. And both the unemployment and discouraged worker numbers were up year-over-year, again a sign that the economy is just not growing fast enough to absorb the jobless - let alone new workforce entrants.

The Central Bank added that while the Bahamian tourism industrys performance continued to improve, this was largely on the back of discounting and promotions. The latter included the ‘Two Fly Free promotion and the airfare credit programme.

For the eight months to end-August 2012, Nassau and Paradise Island`s 14 largest hotels generated a collective 5.5 per cent increase in room revenues. This stemmed from a 6.4 percentage point gain in average occupancy rates to 74.7 per cent, but average daily room rates (ADRs) were down 3.8 per cent to $238.68.

The Central Bank added: “The sector’s performance still appeared to trail its pre-recession levels, as room revenues were nearly 10 per cent below their 2008 levels.”

Elsewhere, the Bahamas` foreign currency reserves were down 19.5 per cent year-over-year at end-August 2012, having dropped from $1.032 billion to $831.1 million, as the seasonal summer holiday drawdown and profit repatriation kicked-in.

Commercial banks` excess cash holdings fell by $72.7 million, after a $92.1 million decrease in 2011, while surplus liquidity in the system declined by $70.6 million to $961.5 million.

“The Central Bank’s net foreign currency sale increased by $3.2 million to $55.3 million, of which almost 70 per cent ($38.3 million) was to meet public sector requirements, related mainly to fuel payments,” the monetary regulator added.

While Bahamian dollar credit expansion rose by $33 million to $77.5 million in August, this was generated solely by net claims on the Government. Highlighting the continued weak economy, credit advanced to the private sector fell by $2.4 million.

“Although consumer credit advanced by $6.2 million vis-�-vis a $5.2 million year earlier decline, commercial and other loans decreased by $8.2 million, in contrast to a comparative $15.1 million gain, while the fall-off in mortgages slowed by $2 million to $0.4 million,” the Central Bank said.

And, while not spread across all Bahamian commercial banks, total loan arrears rose by $43.4 million or 3.7 per cent to hit $1.234 billion at end-August 2012. This meant that 19.8 per cent, or barely just shy of $1 out of every $5 lent, is in arrears or non-performing.

Given that August is typically peak vacation time, loan arrears tend to spike during this month, as Bahamians are either away - and thus late on due payments - or miss a payment to afford their holiday.

This phenomenon was again indicated by the Central Bank data, which noted: “The deterioration in the loan portfolio was concentrated in the short-term (31-90 day) segment, which rose by $31.6 million (8.4 per cent) to $406.9 million, resulting in a 50 basis point firming in the attendant ratio to 6.5 per cent.

“Similarly, non-performing loans - those exceeding 90 days and on which banks have stopped accruing interest - expanded by $11.9 million (1.5 per cent) to $827.2 million, with the corresponding loan ratio widening by 18 basis points to 13.3 per cent.”

And the Central Bank added: “In terms of the main categories, the expansion in delinquencies was led by a $38.4 million (14.4 per cent) hike in the commercial segment, to $305.7 million, as short-term arrears advanced by $37.7 million (49.4 per cent), and those in the 91 days and over category, by a more moderate $0.7 million (0.4 per cent).

“Similarly, consumer loan delinquencies moved higher by $3.1 million (1.2 per cent) to $265.7 million, with those in the 31-90 day component up by $3.3 million (3.3 per cent), to eclipse the more muted $0.1 million (0.1 per cent) decline in the non-accrual segment.

“Mortgage arrears rose by $1.9 million (0.3 per cent) to $662.7 million, comprising an $11.3 million (2.5 per cent) upturn in non-performing loans, which outpaced the $9.4 million (4.7 per cent) reduction in the short-term component.”

Bahamian commercial banks wrote-off an estimated $25.7 million in delinquent loans during August 2012, while recoveries amounted to $4.4 million.