CB governor: Slow economic turnaround in first half of 2021

The Bahamian economy began a slow turnaround amid the COVID19 pandemic during the first half of the year, Central Bank of The Bahamas (CBOB) Governor John Rolle said yesterday, pointing to gains in tourism activity which bolstered reserves and foreign currency sales.

The most recent data from the Ministry of Tourism showed that total foreign arrivals during the month of May stood at 93,876. New data from Nassau Airport Development Company Limited (NAD) revealed that total departures, net of domestic passengers, recovered to 84,559 in June.

“The rebuilding in tourism has been most marked in respect of the second quarter of 2021, although on a year-to-date basis, the half-year outcome is still lower than in 2020. Two other factors also stand out in tourism. The first is that there has been a relatively faster recapture of business in the Family Islands compared to New Providence and Grand Bahama. The second is that the vacation rental market has experienced stronger demand recovery than hotels. In the meantime, the cruise sector business will only begin to resume in the second half of 2021,” Rolle said during a quarterly economic briefing to the media held virtually yesterday.

“The first-half tourism improvement was evident in strengthening foreign currency inflows through the banking system. In particular, commercial banks’ foreign currency purchases rose by 10 percent compared to 2021. With fewer restrictions on local commerce and travel, the sale of foreign currency for travel and other uses outside The Bahamas strengthened by approximately 7 percent.”

With the return of tourism, the Central Bank has projected the economy would grow by about two percent in 2021. Rolle said this forecast falls in line with the bank’s expectations of modest recovery in the first year post-pandemic and related economic challenges, with more substantial recovery in the subsequent years.

“The main determinant of how we do in regards to the GDP target is how much business the hotel sector is able to recover. Recall that for the hotel sector anything that happens between now and the end of the year is compared to a period in 2020 when there was virtually no activity. So from that point of view, two percent growth is not a high or an optimistic projection, it is not something that is out of the reach of achieving. Next year we anticipate a stronger performance, partly because it’s expected that in the period of January to June of next year business will continue to be rebuilt,” he said.

“The important point to bear in mind is that 2023 is when we will likely see a full restitution. Even though we see a very healthy growth projection for 2022 added to 2021, we’re still looking at least at a 16 percent reduction in real economic activity that has to be recouped. So when you look at those individual growth rates, bear in mind that the loss relative to 2019 was at least 16 percent in the official estimates. So those numbers might look good, but the base of 2019 signals when you would have recovered all of those drawbacks.”

Outside of the tourism industry’s return, Rolle said the construction sector continues to receive important stimulus from foreign investment inflows.

“Given anecdotal reports of strong demand for upscale residential properties, such support could continue alongside the impulse from Hurricane Dorian-related rebuilding,” he said.

“In the meantime, the economy is experiencing moderately higher inflation because of increased costs on imports, as the pandemic has caused supply shortages for some goods and fuel prices have risen.”

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