The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Central Bank of the Bahamas has warned that “potential softness” in key visitor source markets is creating some downside for the tourism industry’s 2014 performance, with the sector “relatively flat” in January.

The monetary regulator, in its report on monthly economic developments, said the Bahamian economy had endured a “subdued” start to the year.

The Central Bank said: “Tourism sector performance in January was reportedly adversely affected by a decline in room capacity, linked to the temporary closure of one mid-sized property and lower inventory levels in five other hotels.

“As a consequence, total room revenue - as determined from a sample of large hotels in New Providence and Paradise Island - fell by 1.3 per cent, year-on-year, despite the 1.4 per cent rise in the average hotel occupancy to 59.2 per cent, and the 0.5 percentage points gain in the average daily room rate (ADR) to $241.73.”

This translated into the Bahamian economy’s overall performance, the Central Bank finding: “Preliminary indications suggest that domestic economic developments were subdued during the month of January, owing primarily to a relatively flat tourism performance.

“However, conditions continued to benefit from steady foreign investment-led activity, which sustained employment opportunities in the construction sector.”

The report also sounded a slightly gloomier note about the Bahamas’ 2014 tourism prospects, a year that is expected to be much brighter with Baha Mar’s opening and other room inventory, especially Grand Bahama’s Memories resort, coming online.

The Central Bank’s tone appears to have been influenced by weaker than-expected economic showings in major developed economies, although it did not specify which.

“The moderate near-term growth outlook for the domestic economy continues to hinge on the expectation that tourism performance will benefit from the ongoing growth in several key source markets,” the Central Bank said, “although signs of potential softness in developed economies could provide downside risks to this outlook.

“However, steady foreign investment activity in the sector should continue to support the recovery and sustain the gradual improvement in employment conditions.

“Price movements are not expected to be a major source of risk, given the downward bias in the global inflationary outlook, although some upward pressure is expected from the implementation of the Government’s Value-Added Tax (VAT).”

The Central Bank also noted the “pervasive weakness in domestic demand, the consumer debt overhang and banks’ conservative lending stance, [which] continue to depress private sector credit condition”.

Meanwhile, the Central Bank noted that the commercial banking industry’s bad loan situation stabilised in January, even declining slightly by $8.7 million to $1.344 billion or 21.8 per cent of outstanding credit.

“By average age, short-term delinquencies (31 to 90 days) were lower by $18 million (4.7 per cent) at $368.2 million, and by 29 basis points to 5.98 per cent of total loans,” the Central Bank said.

“In a modest offset, non-performing loans, those over 90 days and on which banks have stopped accruing interest, rose by $9.3 million (1 per cent) to $975.3 million, with the attendant loan ratio firming by 16 basis points to 15.83 per cent.”

The Central Bank added: “By loan category, the reduction in total arrears was mainly due to a decline in the mortgage segment, by $9.3 million (1.3 per cent) to $721.7 million, linked to a $10.3 million (4.9 per cent) decrease in 31-90 day delinquencies, which outweighed the $1.1 million (0.2 per cent) rise in those in excess of 90 days.

]”Similarly, consumer loan arrears improved by $3.7 million (1.4 per cent) to $263.6 million, owing to an $8.4 million (8.7 per cent) contraction in the short-term segment, which outstripped the $4.7 million (2.8 per cent) rise in non-accrual loans.

“Commercial loan delinquencies, however, moved higher by $4.3 million (1.2 per cent), reflecting gains in both the non-performing and the short-term categories, of $3.5 million (1.3 per cent) and $0.8 million (1.1 per cent), respectively.”