Central Bank: Economy will ‘expand at a modest pace’ in 2018
The Central Bank of The Bahamas (CBOB) expects the Bahamian economy to “expand at a modest pace” this year as a result of a strengthening tourism sector and construction activity related to foreign direct investment.
The CBOB Monthly Economic and Financial Developments (MEFD) report explains that the growth in tourist arrivals should be supported by increases in hotel capacity and economic improvements in key markets such as the United States.
Hotel capacity is likely to be expanded by the impending opening of the Rosewood at Baha Mar and the reopening of the Grand Lucayan complex, if government can complete the deal sooner than later.
The MEFD adds that, with “support from public sector initiatives, labor market conditions are likely to improve gradually”. Government has been holding job fairs on both New Providence and Grand Bahama.
“Meanwhile, the potential for medium-term improvement in the government’s operations remains dependent on the success of measures to improve revenue administration and contain expenditure growth, although external shocks could adversely affect such efforts,” the MEFD explains.
“Inflationary pressures should remain subdued, although the recent rise in global oil prices may lead to further gains in domestic fuel costs.”
Government recently touted its success in stemming an increase in discretionary recurrent expenditure, though fiscal targets could be missed due to bills left over from the previous Progressive Liberal Party (PLP) government.
Meantime CBOB is reporting continued robust banking sector liquidity, although due to banks’ continued hesitance to lend money.
“Nonetheless, banks’ credit quality indicators are expected to continue to improve gradually, reflecting mainly loan restructuring activities, enhanced debt collections efforts and the gradually improving financial circumstances of existing borrowers,” the MEFD notes.
“In this environment, banks are expected to remain highly capitalized, thereby mitigating any financial stability concerns.
“Conditions also remain favorable for further, moderate private sector net contribution to external reserve growth during the year.”
The Central Bank revealed in its report that private sector loan arrears declined by $1.9 million to $882.9 million last month, “and the ratio as a proportion of total loans, fell by five basis points at 15.4 percent”.
“Disaggregated by loan type, the fall in arrears was led by an $8.2 million (8.9 percent) contraction in commercial loan delinquencies to $84.2 million, owing to an $8.0 million (29.0 percent) decline in short-term exposures, while the non-performing segment softened by $0.2 million (0.4 percent),” the report states.
“Similarly, mortgage arrears contracted by $2.6 million (0.5 percent) to $531.5 million, owing to a $6.4 million (1.8 percent) reduction in non-accrual loans, which eclipsed the $3.8 million (2.0 percent) increase in 31–90 day delinquencies.”
Despite those figures, consumer loan arrears continued to mar the market, rising by $8.9 million or 3.4 percent, to $267.2 million.