Government Debt decreases and revenue collections increased Central Bank reports…

Published: Monday October 3rd, 2022

Domestic Economic Developments

Overview

Indications are that during the month of August, domestic economic activity continued to recover from the effects of the Novel Coronavirus (COVID-19) pandemic. Tourism output further improved, bolstered by notable gains in the high value-added air segment and the rebound in sea traffic, in response to vaccination efforts and the further relaxation of COVID-19 restrictions in some of the major source markets. On the fiscal front, Government’s budgetary operations for FY2021/22 recorded a considerable reduction in the deficit, underpinned by a value added tax-led recovery in revenue collections, which outstripped the rise in aggregate expenditure. Monetary sector developments were marked by moderated growth in banking sector liquidity, albeit the expansion in domestic credit outstripped the buildup in the deposit base. In line with net deposit and credit trends, external reserves contracted, largely reflecting the demand for foreign currency to facilitate public and private sector transactions.

Real Sector

Tourism

Monthly data revealed that the tourism sector sustained it recovery momentum in August, amid ongoing adjustments to the Novel Coronavirus (COVID-19) pandemic.

Official data provided by the Ministry of Tourism (MOT) showed that total visitor arrivals by first port of entry expanded to 678,273 in July, from 183,580 visitors in the corresponding period of 2021. Leading this outturn, the dominant sea traffic advanced to 520,511, from just 49,651 visitors in the previous year. In addition, air traffic increased to 157,762 from 133,929 in the prior year—representing 89.7% of the volumes registered in 2019.

Disaggregated by major port of entry, total arrivals to New Providence more than doubled to 315,244 visitors in July, from 118,797 in the comparative period of 2021. Contributing to this development, the air and sea segments both advanced to 121,032 and 194,212 visitors, respectively. Similarly, traffic to the Family Islands rose to 319,703 from 53,145 a year earlier, as respective air and sea passengers measured 32,941 and 286,762. Further, foreign arrivals to Grand Bahama amounted to 43,326, vis-à-vis 11,638 in the prior year, attributed to gains in the air and sea components, of 3,789 and 39,537, respectively.

On a year-to-date basis, total arrivals recovered to 3,676,692 compared to just 597,233 in the comparative 2021 period, when a 65.5% contraction was registered. Supporting this outcome, air arrivals rose to 892,738 passengers, relative to the 34.6% expansion in the preceding year, reflecting gains in all major markets. Further, sea arrivals increased to 2,783,954 visitors, a turnaround from a 92.2% decline in 2021.

More recent data provided by the Nassau Airport Development Company Limited (NAD) indicated that for the month of August, total departures—net of domestic passengers—grew to 132,347 from 101,530 in the corresponding month of 2021. Specifically, U.S. departures rose to 116,335 from 94,166 in the previous year, while non-U.S. departures advanced to 16,012 from 7,364 in the preceding year. On a year-to-date basis, total outbound traffic expanded to 908,199 from 475,317 passengers in the prior year, extending the 24.0% recovery a year earlier. Reflecting this outturn, U.S. departures rose to 787,527 visitors, following a 41.1% increase in the corresponding 2021 period. Similarly, non-U.S. departures rebounded to 120,672, a switch from a 63.4% decline in 2021.

In the short-term vacation rental market, data provided by AirDNA for August revealed positive trends. In particular, total room nights sold advanced to 140,512 from 93,635 in the corresponding 2021 period. Reflective of this outturn, the occupancy rates for both entire place and hotel comparable listings increased to 55.1% and 51.9%, respectively, from 49.9% and 46.5% in the prior year. Further, price indicators showed that year-over-year, the average daily room rate (ADR) for entire place listings rose by 4.6% to $506.85, while hotel comparable listings firmed by 2.4% to $178.90.

Fiscal

Preliminary data on the Government’s budgetary operations for FY2021/22 revealed that the deficit narrowed significantly to $689.5 million from $1,335.7 million in FY2020/21. Underlying this outturn, total revenue rose by $700.7 million (36.7%) to $2,608.6 million, outpacing the $54.5 million (1.7%) rise in aggregate expenditure to $3,298.1 million.

The growth in revenue collections was led by a $551.0 million (34.2%) increase in tax receipts. Specifically, taxes on goods and services grew by $325.4 million (27.9%) to $1,492.0 million, as VAT receipts rose by $395.7 million (53.5%), to $1,135.8 million, underpinned by the recovery in economic activity. Likewise, proceeds from financial & realty stamp taxes moved higher by $25.5 million (44.4%), to $83.0 million. In addition, revenue from gaming taxes advanced to $51.3 million from $37.8 million in the prior year. Taxes on the use or supply of goods and services also increased by $20.5 million to $175.4 million, largely explained by higher intake from business licenses ($19.4 million), marine licenses ($2.0 million) and motor vehicle taxes ($1.3 million). Further, receipts from international trade and transactions—inclusive of exports, customs & other import duties and departure taxes—expanded to $511.8 million, from $299.1 million in the prior fiscal year, undergirded by a rebound in tourism sector activities. In addition, property tax collections rose by $3.5 million to $147.0 million, while general stamp taxes increased to $11.1 million from just $1.6 million in the preceding year. Non-tax revenue grew by $149.5 million (50.3%) to $446.4 million, as proceeds from the sale of goods and services moved higher by $49.4 million (28.2%), while property income advanced to $82.8 million, from $35.3 million in the previous year.

The growth in aggregate expenditure was credited to a $142.0 million (4.9%) rise in recurrent spending, to $3,014.5 million. Underlying this outturn, interest payments grew by $129.3 million (30.6%), to $551.8 million, compared to FY2020/21, due to increased obligations related to the COVID-19 pandemic. Further, outlays for employee compensation rose by $24.4 million (3.5%) to $725.3 million; the use of goods & services, by $19.8 million (3.2%) to $633.4 million and subsidies, by $17.5 million (3.7%) to $491.6 million. In addition, other “miscellaneous” outlays advanced by $67.3 million to $317.2 million, largely attributed to an elevation in insurance premium payments. Providing some offset, outlays for social benefits decreased by $124.7 million (50.9%) to $120.4 million. Meanwhile, capital outlays declined by $87.4 million (23.6%) to $283.6 million, reflecting a $37.4 million (38.8%) reduction in capital transfers to $58.8 million.