The Tribune

By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

THE Central Bank of The Bahamas said that the economy will “register marginal growth” for 2021.

The bank, in its Monthly Economic and Financial Developments (MFED) for November, said: “The domestic economy is projected to register marginal growth in 2021, undergirded by ongoing improvements in the tourism sector. In this context, further strengthening in tourism output remains reliant upon sustained progress at the global level, in curtailing and lowering the spread of COVID-19. In addition, several new and ongoing foreign investment-led projects, along with post-hurricane rebuilding works, are expected to provide support to the construction sector.

“In terms of labour market conditions, the unemployment rate is anticipated to remain elevated over the near term, with any job gains occurring primarily in the construction sector and the full re-engagement of tourism sector employees. With regard to prices, inflationary pressures are forecaste to remain contained, although some firming is estimated, due to the rise in international oil prices.

“On the fiscal front, subdued revenue collections and costs associated with health and social welfare related to COVID-19, combined with spending still for ongoing restoration of key infrastructure following the 2019 major storm, are expected to weigh heavily on Government’s fiscal outturn. In addition, forecasted revenue shortfalls should continue, with expectations that taxable economic activity should remain below capacity, improving mostly in line with tourism recovery. Accordingly, the budgetary gap will be financed with important use of external credit, but with a likely higher percentage of the total funding from domestic sources.”

The bank also said: “Monetary sector developments will continue to be marked by elevated levels of banking sector liquidity, due to commercial banks maintaining their conservative lending stance. Likewise, external reserve balances are anticipated to surpass its 2020 levels, despite some seasonal drawdowns over the rest of the year, with the greater share of foreign currency demand satisfied by private sector receipts. Consequently, external balances are poised to remain more than adequate to sustain the Bahamian dollar currency peg.

“Based on the current outlook, the Central Bank will retain its accommodative stance for private sector credit and continue to pursue policies that ensure a favourable outturn for external reserves, and mitigate financial sector disruptions. In addition, the Bank will continue to assess developments within the foreign exchange market, and if necessary, adopt appropriate measures to support a positive outcome for the foreign reserves.”