NASSAU, The Bahamas – While giving his mid-year 2023/24 Budget Statement to Parliament, on February 21, 2024, Prime Minister and Minister of Finance the Hon. Philip Davis stated that, in 2023, The Bahamas experienced a “robust” economic rebound, primarily fueled by significant tourism inflows, leading to an estimated real GDP growth of 4.3 percent.
“This growth, while lower than the previous year’s remarkable 14.4 percent, produced an unemployment rate below nine percent,” he said. “Inflation peaked in mid-2022. The current account deficit also narrowed to 6.2 percent of GDP, showcasing a positive trend in external balances.”
“Preliminary indications suggest that the domestic economy maintained its growth trajectory in the latter half of 2023, at a gentler pace, as economic conditions continued to normalize,” Prime Minister Davis added. “Strong tourism performance was supported by increases in both air traffic and sea arrivals, reflecting continued demand for travel in our key source markets.”
He pointed out that, as consumer activity expanded, so did inflationary pressures, albeit in a more subdued manner, compared to recent experience, as measured by changes in the average Consumer Price Index.
“At the end of November, the Index rose 2.0 percent as compared to the prior year – largely owing to increased health prices, as well as domestic adjustments to the rise in global commodity prices,” Prime Minister Davis noted. “However, transportation prices had a noteworthy decline, reflecting a moderation in the rate of increase in global oil prices compared to the previous year.”
Prime Minister Davis said, looking ahead to 2024, the economic outlook remained favorable, with continued growth anticipated, especially in the tourism sector.
He added that his Government remained aware of the risks The Bahamas faced as a developing small island nation, including the possibility of economic slowdowns in tourism source markets, or costly natural disasters.
“The government is taking multiple steps to address these risks and bolster our economic resilience, including measures to build fiscal buffers, as well as exploring investments in renewable energy infrastructure,” he noted.
While commenting on the fiscal performance for the first half of the 2023/24 fiscal year, Prime Minister Davis started with the provisional revenue estimates.
For the first six months of the year, he noted, preliminary total revenue collections were assessed at $1.3 billion, which represented a $43.8 million increase over the same period of the prior year. To date, Prime Minister Davis added, revenue collections accounted for 39.2 percent of the annual budget target.
“Stronger collections are expected in the second half of this fiscal year, reflecting the cyclical nature of the fiscal year,” he stated. “In addition, the revenue yield in the second half of the fiscal year will benefit from new measures such as the increase of the cruise departure tax and the new Business Licence Act.”
“This Act introduces new fees for International Businesses Companies (IBCs) for the first time,” he added. “We have not forecasted any major uplift as IBCs by their very nature are mobile.”
Prime Minister Davis gave some key highlights on revenue collections by pointing out that Tax revenue collections improved by $72.9 million, and stood at $1.2 billion for the first six months of the fiscal year. This represented 40.1 percent of the budget target, he noted.
“This administration implemented a structural reform in the VAT regime, effective January 2022, which reduced the rate from 12.0 percent to 10.0 percent,” Prime Minister Davis said. “Value-added tax collections accounted for 55.2 percent of tax revenues, and totaled $646.0 million at the half-year mark.”
He added: “This represented growth of $47.2 million relative to the same period in the previous year, and equated to 40.6 percent of the annual budget target. Compared to Fiscal Year 2021/2022, before the VAT rate reform, the six-months VAT collections this year have increased by 18.6 percent or $101.4 million. We reduced the rate of VAT, but the strength of our growing economy, along with significant improvements to our enforcement efforts, has led to increased VAT revenues.”
Prime Minister Davis pointed out that excise tax during the period improved to $15.4 million, a $14.3 million increase compared to the previous year. At the half-year mark, excise tax surpassed the budget target by 540.9 percent or by $13.0 million, he added.
“With the sustained improvement in the tourism sector, departure tax collections totaled $84.8 million, and improved by $13.3 million relative to the previous year,” Prime Minister Davis said.
“At the half-year mark, Departure tax accounted for 42.5 percent of the budget target.”
“With introduction of the departure tax adjustments for cruise passengers, we expect a further and significant increase in this revenue component for the remaining six months of the fiscal year,” he added.
“In the non-tax revenue component, collections were mainly higher for fees and service charges as they relate to customs fees, which increased by $5.4 million to $27.6 million, and equated to 50.3 percent of the budget target.”
