The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamian economy endured a “soft” January amid “constrained” tourism output, with passenger traffic passing through Lynden Pindling International Airport (LPIA) up just 0.1 per cent year-over-year.

The Central Bank of the Bahamas, in its report on January’s economic developments, said the “subdued” tourism industry performance offset increased construction activity related to the post-Hurricane Matthew rebuilding and the impact from ongoing foreign direct investment (FDI) projects.

“Preliminary indicators suggest that domestic economic activity remained soft during January,” the Central Bank said. “This reflected subdued tourism gains, which dampened strengthened construction output from the post hurricane rebuilding efforts and stimulus from varied-scale foreign investment (FDI) projects.

“Initial data on foreign currency purchases by commercial banks from the private sector underscored some gains in trade and FDI-related activity.

“However, statistics on airport traffic showed that the tourism impulse was constrained. Data from the Nassau Airport Development Company (NAD) indicated a marginal, 0.1 per cent uptick in passenger traffic through the main airport in January, year-on-year, a slowdown from the 4.1 per cent increase recorded in the previous month,” the Central Bank added.

“An analysis by region showed that the dominant US segment rose by 1.5 per cent following December’s 5.7 per cent upturn. However, traffic from other markets contracted by 6 per cent, extending the prior month’s 4.2 per cent fall-off.”

The Central Bank, though, is sticking to its forecast that Baha Mar’s purported ‘phased’ opening, and the gradual ramp-up to a 3,000-4,000-strong workforce, together with ongoing hurricane restoration and other FDI projects, will gradually improve both GDP growth and employment prospects during 2017.

“Expectations are that the domestic economic indicators will show mild improvement during 2017, as tourism capacity is increased as result of Baha Mar and other sector-related investments,” the Central Bank said.

“The near-term boost to construction is expected to continue, in line with both hotel sector investments and hurricane rebuilding efforts. Against this backdrop, employment conditions are anticipated to improve gradually, while domestic inflationary pressures are expected to remain contained, notwithstanding some recent elevation in crude oil prices that could push domestic energy cost higher.”

On the monetary front, excess liquidity in the Bahamian commercial banking sector increased by $52.9 million to break the $1.5 billion mark, the latter figure representing assets available for lending but unable to find suitable, creditworthy borrowers.

The industry’s loan arrears remained relatively flat, standing at just over $1 billion or 17.3 per cent of total outstanding bank credit, having reduced by $1.3 million in January 2017.

Short-term delinquencies, meaning loans between 31-90 days past due, fell by $3.5 million or 1.2 per cent month-over-month to $278.1 million, while non-performing loans that are 90 days or more past due jumped to $731.3 million.

Assessing the longer-term trend, the Central Bank said the banking industry’s arrears to total loan ratio had dropped by 3.2 percentage points compared to January 2016, when it had been at 20.3 per cent.

The non-performing loans ratio, in particular, had fallen by 2.9 percentage points, largely due to one commercial bank selling off a portion of its non-performing mortgage portfolio.

“An assessment by loan type showed that the most significant decreases occurred for mortgages, which fell by $6.5 million (1.2 per cent) to $514.6 million, reflecting a $4.6 million (3 per cent) decrease in short-term delinquencies, and a $1.9 million (0.5 per cent) rise in the non-performing loan component,” the Central Bank said.

“In contrast, consumer loan arrears rose by $3.1 million (1.2 per cent) to $260.8 million, amid a $3.6 million increase in the non-performing loan category, which eclipsed the $0.5 million (0.5 per cent) softening in the 31-90 day segment.

“Similarly, commercial loan arrears were $2.1 million (0.9 per cent) higher at $233.9 million, reflecting gains in both the short and long-term components by $1.6 million (3.8 per cent) and $0.5 million (0.3 per cent), respectively.”

The Central Bank added: “On a monthly basis, banks reduced their total provisions for loan losses by $46.7 million (9.1 per cent) to $468.2 million in January.

“Accordingly, the ratios of provisions to both arrears and non-performing loans contracted by 4.6 and 6.6 percentage points to 46.4 per cent and 64 per cent, respectively. During the review period, banks also wrote off a total of $9.5 million in bad debts and recovered $2.7 million of overdue loans.”