The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

The Central Bank of the Bahamas believes Value-Added Tax’s (VAT) inflationary impact will be partially “counterbalanced” by declining global oil prices.

In its monthly economic report for September, the Central Bank said that based on current projections, the Bahamian economy’s modest growth rate would endure for the remainder of 2014 with some firming in 2015.

This, it added, would be supported by foreign investment-led construction activity and ongoing gains in the stopover segment of the tourism market.

“In this context, expectations are that labour market conditions will continue to improve at a measured pace over the near-term, with the majority of the job gains occurring in the tourism and construction sectors,” the Central Bank said.

“Inflation is expected to pick-up towards the end of the year, albeit from a very low base, due to the implementation of the VAT) - to be partially counterbalanced by the observed downward trajectory in global oil prices.

“On the fiscal side, any significant opportunites for improving the Government’s deficit and corresponding debt indicators remain contingent upon the pace and broadening of economic activity, alongside the success of new measures to enhance revenue collections. Programmed initiatives to curtail expenditure growth will also have a positive impact on the fiscal outcome.”

On the tourism front, data for the eight months to August showed total visitor arrivals increasing by 3 per cent to 4.3 million, extending the previous year’s gain of 2.3 per cent.

The Central Bank said stopover visitors rebounded by 3.6 per cent from a 6.3 per cent reduction a year earlier, while the growth in sea visitors slowed to 2.8 per cent from 5.1 per cent.

By major port of entry, arrivals to New Providence were up by 2.3 per cent to 2.5 million, driven by improvements in both sea (2.9 per cent) and air (0.8 per cent) visitors.

A similar outcome was registered in the Family Islands, where total arrivals expanded by 8.9 per cent to 1.3 million, reflecting a 10 per cent surge in sea traffic and a 1.8 per cent rise in stopovers.

The Central Bank said visitors to Grand Bahama declined by 6.7 per cent to 0.5 million, as the 12.6 per cent contraction in the sea segment offset he 38.9 per cent expansion in air traffic.

Commercial banks’ credit quality indicators improved modestly in Septemebr, due to broad-based reductions in delinquencies across all institutions.

Total private sector loan arrears fell by $21.4 million (1.5 per cent) to $1.38 billion, with the ratio of arrears to total loans narrowing by 3 basis points to 2.5 per cent.

“In terms of the average age of delinquencies, the short-term (31-90 day) segment moved lower by $23.9 million (6.8 per cent) to $328.4 million, and the relevant ratio decreased by 39 basis points to 5.4 per cent,” the Central Bank said.

“By contrast, non-performing loans - arrears in excess of 90 days and on which banks have stopped accruing interest - grew by $2.5 million (0.2 per cent) to $1.052 billion, and by five basis points to 17.2 per cent of total private sector loans.

“The decline in total private sector arrears was led by a $9.9 million (2.6 per cent) fall-off in commercial delinquencies, to $367.6 million, as both the 31-90 day and non-accrual categories decreased by $5.1 million.”