The Central Bank of The Bahamas (CBOB) expects the Bahamian economy to continue to trend positively given the continued improvements in key tourism source markets like the United States, the central bank’s Monthly Economic and Financial Developments (MEFD) report for May reveals.
The MEFD report notes that the increase in high-end room capacity, along with several foreign investment projects, has accounted for the continued positive economic trajectory and will have a direct impact on employment.
Meanwhile, inflationary pressures for Bahamians remain on the “mild” side, the MEFD report states.
“In this environment, employment conditions are expected to improve gradually, while domestic inflationary pressures are anticipated to remain mild; although a modest uptick in the rate is expected to persist over the remainder of the year, reflecting the lingering pass-through effects from the hike in the VAT (value-added tax) rate and higher global oil prices,” the report points out.
Last year the government increased VAT from 7.5 percent to 12 percent in order to stabilize the government’s coffers.
The MEFD report notes that the government will only be successful in lowering the country’s deficit if it is effective in decreasing expenditure growth, increasing revenue gains and adhering to its fiscal responsibility benchmarks.
“The passage of the relevant legislation and implementation of the fiscal responsibility safeguards should serve to strengthen the government’s debt management operations,” the report states.
CBOB continues to keep an eye on the “liquidity overhang in the banking system, in order to mitigate the potential risks posed to external reserves from accelerated consumer-related credit growth over the near term”.
“In this regard, the bank will continue with net sales of its holdings of government securities to absorb the excess liquidity over time,” the MEFD report states.
“In addition, the establishment of a credit bureau will serve to reduce the potential for lending institutions to extend credit on an unsound basis to unqualified borrowers.”
Education: Florida International University, BS in Journalism
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