The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Central Bank yesterday identified a mixed outlook for the Bahamian economy, with increased domestic demand offset by a “subdued” tourism performance that saw air departures shrink by 3.6 per cent.

The regulator, in its report on April economic developments, said the reduction in foreign passengers departing through Lynden Pindling International Airport (LPIA) was led by a 4.5 per cent US drop-off.

“Data available for the first four months of the year still reflected a subdued cumulative outcome for tourism,” the Central Bank said. “Specifically, the number of passenger departures contracted by 3.6 per cent, in contrast to a 2.3 per cent increase in the comparable period of 2016.

“The United States component was reversed to a 4.5 per cent decline, vis-à-vis an increase of similar magnitude in the prior year. In a partial offset, non-US international departures firmed by 1.2 per cent, compared to a 7.5 per cent fall-off a year ago.”

April departures through LPIA received a boost from Easter’s timing, as well as the staging of sporting events such as the IAAF World Relays.

“Buoyed by the hosting of several international sporting events, as well as Easter holiday-related tourists, data from the Nassau Airport Development Company (NAD) showed that visitor traffic through the country’s main airport—net of domestic departures—grew by 4.4 per cent in April, year-on-year, a turnaround from a 2.1 per cent decline in the same month of 2016,” the Central Bank said.

“Underlying this increase, the dominant US market grew by 2.3 per cent, extending the 1.1 per cent uptick noted in the prior period. Moreover, the number of the non-US international travellers improved by 17.9 per cent, a reversal from the year earlier contraction of 18.7 per cent.”

The International Monetary Fund (IMF) has projected the Bahamian economy will expand by 1.4 per cent in 2017, following four consecutive years of negative or no growth. The Central Bank said it had identified signs of increased Bahamian consumer demand in April, although it did not identify the driving factors.

“Signs of increased domestic consumer demand were evident from higher private sector spending on travel and imports, both for the month and on a year-to-date basis. This stronger internal demand paced moderately ahead of the improvement in the foreign exchange earnings sectors, influencing a more subdued seasonal accumulation in external reserves,” the Central Bank.

“Expectations are that the domestic economy will maintain a mildly positive growth trajectory in 2017, supported by gains in the tourism and construction sectors, following the phased addition of significant new capacity in New Providence, as well as ongoing work on other smaller-scale foreign investment projects.

“As a consequence, employment conditions are projected to gradually improve, with the majority of the near-term gains accruing to the tourism and construction sectors.”

However, private sector loan arrears breached the $1 billion mark at end-April following a $19.9 million or 2 per cent increase in ‘bad’ credit for the month.

Loan arrears as a percentage of total outstanding bank credit also increased by 34 basis points to 17 per cent, as non-performing loans (those 90 days or more past due) grew by $11.8 million to hit $728.4 million. Short-term delinquencies were also up by $8.1 million or 3 per cent to $276 million.

Non-performing loans stand at 12.3 per cent of total bank credit, and the Central Bank said: “An analysis by loan type showed that the most significant increase occurred for commercial delinquencies, which advanced by $12.3 million (5.7 per cent) to $229.7 million, amid rises in both the short and long-term categories by $7.2 million (24 per cent) and $5.1 million (2.7 per cent), respectively.

“Similarly, consumer loan arrears rose by $5.5 million (2.1 per cent) to $264.7 million, almost all due to the $5.6 million (3.3 per cent) increase in the non-performing loan category, given the mild $0.02 million (0.02 per cent) softening in the 31-90 day segment.

“In addition, mortgage delinquencies firmed by $2.1 million (0.4 per cent) to $510.1 million, reflecting increases in both long-term and short-term arrears of $1.1 million (0.3 per cent) and $0.9 million (0.6 per cent), respectively.”

Bahamas-based commercial banks increased their loan loss provisions by $2 million as a result, with their ratios to arrears and non-performing loans standing at 47.8 per cent and 66 per cent at month’s end.

“On a year-on-year basis, the total arrears rate lessened by 2.3 percentage points, due solely to a similar fall in the non-accrual rate, while the short-term arrears rate was virtually unchanged,” the Central Bank said.

“In terms of the components, declines were recorded for mortgages (by 3.5 percentage points to 19 per cent), commercial loans (by 1.5 percentage points to 27.1 per cent) and consumer loans (by 84 basis points to 11.1 per cent).”