The Central Bank of The Bahamas (CBOB) expects the country to post an uptick in domestic output this year, but is bracing for subdued growth in 2020 as the effects of Hurricane Dorian on the economy begin to become more evident, the bank explained in its Monthly Economic and Financial Developments (MEFD) report for November.
The central bank explained that this year domestic output maintained its modest growth thanks to strong tourism growth at the beginning of the year and continued tourism activity on New Providence and in the Family Islands after Dorian.
“Expectations are that the outturn for 2019 will feature a modest uptick in domestic output, underpinned by the substantial gains in tourism during the first half of the year, combined with positive impulses from foreign investment-led construction activity,” the MEFD report states.
“Indications are that growth will be more subdued in 2020, as increased momentum in hurricane rebuilding activity is countered by the increase in imports to aid the same, as well as the temporary reduction in tourism capacity.”
The report explains that because of Dorian, employment is likely to dampen, “with gains concentrated within the hotel sector”, while inflation will be subdued as long as there are no shocks to global oil prices.
According to data from the Nassau Airport Development Company Ltd. (NAD) in the MEFD report, foreign departures increased this year by 13.1 percent from January to November, down from the 14 percent growth experienced in the prior year.
“In particular, U.S. traffic rose by 14.3 percent, following the 13.2 percent increase in 2018; while, the non-U.S. international component grew by 5.9 percent, compared to an 18.6 percent expansion a year earlier,” the MEFD report states.
The CBOB in its MEFD report notes that it expects costs associated with Hurricane Dorian to weigh heavily on the government, despite funds from reinsurance and donations from international agencies.
“Most of the fiscal gap will likely be sourced from domestic and external borrowing,” the bank points out.
“Monetary sector developments will continue to feature a build-up in banking sector liquidity owing to the conservative lending posture of commercial banks, and a broadening in the deposit base. Further, external reserves are expected to remain buoyant for the balance of 2019, into the first quarter of 2020, on account of inflows associated with reinsurance and government’s external financing.
“Nevertheless, the overall outturn for 2020 is projected to feature a net contraction in balances due to increased imports to support the restoration of lost infrastructure.”